Aurelia Butler

BOGOTA (Reuters) – The technical team of Colombia’s central bank is predicting a higher benchmark interest rate than that projected by the market because of increased inflationary pressures and stronger-than-expected economic growth, it said on Wednesday.The bank’s seven-member board, like policymakers around the world, has hiked borrowing costs to combat inflation.They raised the benchmark borrowing rate to 9% last week, its highest level since February 2009. Analysts in both a Reuters survey and a bank poll have predicted last week’s decision will mark the end of rate hikes.”The median of the trend of the interest rate expected by the analysts was up in relation to the previous report: 9% for the end of 2022 and 7.8% for the end of 2023,” the technical teams said in its quarterly report.”The trend of projected rates by the technical team has a similar dynamic but is on average higher than that of the analysts,” it added.The team’s estimates do not necessarily reflect policymakers thinking, it said.The team’s higher prediction on the benchmark rate is based on higher-than-expected economic growth amid inflationary pressures and the risk that price rises will remain above-target in the medium term.The technical team has raised its inflation outlook for this year to 9.7%, versus its previous estimate of 7.1%. It also increased its inflation estimate for 2023 to 5.7%, up from a previous 4.8%Colombia’s 12-month inflation hit 9.67% in June, its highest level since 2000 and more than triple the bank’s targeted 3%.”Data shows growth in GDP and especially private consumption that continue to be surprisingly high,” Hernando Vargas, the head of the technical team, told a media conference.”Inflation will begin to descend in the fourth quarter of 2022 because of the dilution of supply shocks, especially for food prices,” he added.Analysts predicted in a Reuters poll last week inflation will have hit 9.98% in July. More

LONDON (Reuters) – The Bank of England is expected to raise interest rates by the most since 1995 on Thursday, even as the risks of a recession mount, in an attempt to stop a surge in inflation from becoming embedded in Britain’s economy.Most investors and economists predict the BoE will increase its benchmark rate by half a percentage point to 1.75%, its highest level since late 2008 at the start of the global financial crisis, when it announces its decision at 1100 GMT.Britain’s main inflation rate has soared to 9.4% – and could hit 15% in early 2023 according to the Resolution Foundation think-tank – as the repercussions of Russia’s invasion of Ukraine combine with post-pandemic strains on the world economy.The BoE, which has already raised borrowing costs five times since December, said in June it would act forcefully if inflation pressures became more persistent.Since then, inflation expectations among the public have eased off a bit and the pricing plans of companies have also moderated, potentially giving the Monetary Policy Committee a case for sticking to its quarter-point rate moves.But the pressure on Governor Andrew Bailey and colleagues has intensified after big rate hikes by the U.S. Federal Reserve, the European Central Bank and other central banks, weakening the value of the pound, which could add to inflation.”We know they’re worried about sterling and in that sense they don’t want to be left as the odd one out by not joining the 50-basis-point club,” James Smith, an economist with ING, said.A Reuters poll published on Monday showed more than 70% of 65 economists expected a half-point increase.On top of everything else, the BoE’s inflation-fighting record has been called into question by Liz Truss, the front-runner to be Britain’s next prime minister. She wants to set “a clear direction of travel” for monetary policy and to review the BoE’s mandate.But some analysts say the BoE could move warily.Signs of a slowdown in the world economy are multiplying, core inflation fell in the latest data, and the central bank’s new forecasts due on Thursday are likely to show inflation falling sharply in two and three years’ time.In its last forecasts in May, the BoE said it saw almost no growth in Britain’s economy before 2025 at the earliest.The National Institute of Economic and Social Research, a think tank, says a recession is coming that will force more than a million households to choose between heating their homes and buying enough food.”Faced with this outlook, we doubt the MPC will judge Bank Rate needs to rise as quickly as markets expect,” Samuel Tombs, an economist with Pantheon Macroeconomics, said.The BoE is also due to give more details of how it plans to start selling down the government bond holdings it racked up over more than a decade of economic stimulus.Bailey said last month that the BoE could reduce by 50 to 100 billion pounds ($61-122 billion) its 844 billion pounds of gilt holdings over the space of a year. ($1 = 0.8220 pounds) More

Support for a UK campaign group which is urging consumers to cancel direct debit payments for their energy bills is “doubling every week” amid growing public anger over soaring domestic fuel prices. Don’t Pay UK, which was founded six weeks ago, said 70,000 people had pledged to halt their direct debits from October 1, when a big rise in energy bill payments is set to take place. With local groups promoting its campaign in cities including London, Brighton, Bristol, Birmingham, Manchester and Sheffield, it said it had received requests from grassroots organisers for 1.6mn flyers, while its Twitter followers have more than tripled from 22,000 to 79,000 in the past week. However, consumer and charity groups have warned consumers that ending direct debits could force them on to more expensive prepayment meters or damage their credit record.“Cancelling your direct debit will . . . take you out of any existing payment plan [such as a fixed-rate tariff or debt repayment plan] and you will lose your discount, adding 7 to 8 per cent to energy bills,” said Gemma Hatvani, founder of the Facebook group Energy Support and Advice UK.Hatvani’s group is campaigning for the government to issue more targeted help for lower-income households, but she fears a non-payment protest would threaten people’s finances. “If you can’t afford to pay your bills, it is better to communicate with your energy provider. If you have no debt, although companies don’t advertise it, asking to switch to a variable direct debit means you will only pay for the energy you use each month, and you can try to cut bills by reducing your consumption.”Energy regulator Ofgem will announce the next update to the price cap at the end of August. In May, after Ofgem said early indications were that the energy price cap would rise to £2,800 from £1,971, the government announced a £15bn package of support.But as gas prices have soared in recent weeks, energy consultancy Cornwall Insight predicted the cap could surpass £3,300 — and exceed £3,600 from January, when the next review is due.National Energy Action, a charity, says 8mn households in England, Wales and Northern Ireland are at risk of falling into fuel poverty. Bumper profits at energy groups have fuelled public anger over domestic bills. BP this week reported its highest quarterly profit in 14 years and announced a 10 per cent boost to its dividend. Shell last week reported it had broken profit records for the second consecutive quarter.

Becky from West Dunbartonshire, a Don’t Pay supporter, told the FT: “My energy bill is £217 [and is] due to go up again in October, which means I’ll be paying more for my energy than my mortgage.” The campaign group has compared its calls for mass non-payment of energy bills with the refusal by millions to pay the poll tax in the 1980s, which contributed to its abolition. Yet experts said there were differences that held important repercussions for consumers.“Cancelling your direct debit means suppliers will . . . start the debt recovery process,” said Matthew Cole, founder of the Fuel Bank Foundation, a charity which issues vouchers to people struggling to pay on prepayment meters. “If you’re on a smart meter, it could be remotely switched to prepayment,” he said, although suppliers would need a magistrate’s warrant to do so. UK households will receive the £400 government grant for energy bills over six monthly instalments from October, with households on benefits receiving additional help. Campaigners say this will not be enough for those struggling to pay.Don’t Pay said: “The government can step in at any time between now and October 1 to avoid the catastrophe awaiting millions this winter.” More

Foreign secretary Liz Truss, frontrunner in the race to become the next British prime minister, said she would look to change the Bank of England’s mandate to ensure it controlled inflation.Speaking at a hustings of Conservative party members in Cardiff on Wednesday, she argued that inflation had been caused by “huge” supply side shocks after the pandemic and the Ukraine war and said she wanted to review the mandate of the central bank, which has a target of maintaining 2 per cent inflation.The central bank is widely expected to raise interest rates on Thursday, possibly by a half percentage point, amid surging prices. In June, consumer price inflation in the UK stood at a 40-year high of 9.4 per cent. She told the event: “The best way of dealing with inflation is monetary policy and what I have said is I want to change the Bank of England’s mandate to make sure in the future it matches some of the most effective central banks in the world at controlling inflation.”Truss added: “The last time the mandate was looked at was in 1997 under Gordon Brown. Things are very, very different now.” The foreign secretary, who has pitched herself as the low-tax, high-growth candidate, has pledged to reduce the planned national insurance rise and introduce low-tax investment zones to reinvigorate the economy and support families through the cost of living crisis. “What is simply wrong at this time is to be putting taxes up on ordinary people when they’re struggling to pay their fuel bills, they’re struggling to pay their food bills,” she said.

Rishi Sunak at the Tory hustings in Cardiff. He said he was open to the idea of examining the rules on inheritance tax © REUTERS

Her campaign received a boost on Wednesday when former health secretary Sajid Javid offered his support. In a comment piece in the Times newspaper, Javid praised the foreign secretary’s “sharp focus and willingness to challenge the status quo”.“Having worked closely with him for years in cabinet, Liz is delighted to have Sajid on her team,” the Truss campaign said. “His support signals that Liz is bringing the party together and they’re uniting behind her bold plan to cut taxes, grow the economy and deliver for the country.”Recent YouGov polling has placed Truss firmly ahead in the leadership race, with 69 per cent of members favouring the foreign secretary, compared with 31 per cent backing former chancellor Rishi Sunak. Speaking on the eve of the BoE’s rate-setting meeting, Sunak warned that rushing through “premature tax cuts” before the country had reduced inflation would worsen the problem and drive up interest rates.

“I will make gripping inflation my number one economic priority. And I will deliver a sustainable, long-term tax plan that means people can bank the money it saves them,” he said before meeting party members. Former Tory leader Lord Michael Howard gave his backing to the former chancellor at the hustings, drawing parallels between Sunak and the late Margaret Thatcher. “She hated inflation. So does Rishi Sunak. She hated the thought of increased borrowing. So does Rishi Sunak. She would never have countenanced unfunded, irresponsible tax cuts. Nor will Rishi Sunak,” he told the audience in Cardiff.Speaking to Tory party members, Sunak also said that while examining the rules on inheritance tax was “not what he set out a plan to do”, he was open to it. He argued that supporting aspiration was a “Conservative value” and inheritance tax formed part of that, but he stressed the importance of rewarding those in paid work. “So, over time, is that something that we should look at? Of course we should, because people who are working hard should be rewarded for that,” he said. More

Growing worries of a recession, geopolitical turmoil and rate hikes have dragged global equity markets, muddying a rebound in investment income from pandemic lows. Overall net investment income fell by 32% to $3.58 billion, hurt by changes in the estimated fair value of certain securities.That led to a 16% fall in total revenues to $15.56 billion in the three months ended June 30. Adjusted earnings of the insurer’s Latin America business saw a 175% jump, however, partially offsetting a 13% decline in its U.S. business and a 26% slump in Asia. MetLife also said its net derivative losses came in at $1.2 billion, compared with a gain of $421 million a year earlier.The insurer holds a book of derivatives to hedge against market volatility. Such gains do not indicate the actual performance of the company, but reflect the effect of accounting rules, an issue that has occurred in some previous quarters.Metlife reported adjusted earnings of $1.63 billion for the second quarter ended June 30, down from $2.1 billion a year earlier.Stripping one-off items, the company reported a profit of $2 a share, sailing past analysts’ estimates of $1.45 a share, according to data from Refinitiv. The company’s premiums, fees and other revenues came in at $13.9 billion, up 23% from last year. More