Aurelia Butler

LONDON (Reuters) – The Bank of England will probably need to raise interest rates much more sharply than financial markets expect to get soaring inflation under control, former policymakers said on Wednesday.The BoE’s Monetary Policy Committee (MPC) has raised its key interest rate four times since December to 1% – the highest level since 2009 – but still expects inflation to exceed 10% by the end of this year.”In my view the nominal interest rate – the short-term interest rate the MPC controls – will have to go up at least 250 to 300 basis points from here,” Adam Posen, who served on the MPC from 2009 to 2012, told the British parliament’s Treasury Committee.That would mean an interest rate of 3.5% to 4% – well above the 2.5% peak priced in by financial markets for June 2023.Posen, who is now the president of Washington’s Peterson Institute for International Economics, said unemployment needed to go higher – effectively requiring a recession – for inflation to fall back swiftly to the BoE’s 2% target.Last month the International Monetary Fund forecast Britain would see weaker growth and higher inflation than any other major advanced economy next year.While countries globally are suffering from soaring energy prices and supply chain bottlenecks, exacerbated by Russia’s invasion of Ukraine, Posen said the extra inflation in Britain appeared to be mostly due to Brexit.The BoE’s own forecasts imply interest rates might rise less than markets expect, as it predicts inflation will significantly undershoot its 2% target in three years if interest rates follow the path expected by markets. Annual consumer price inflation in Britain hit 7.0% in March, the highest reading in 30 years.Current MPC members typically do not talk directly about how high interest rates might go.Massachusetts Institute of Technology professor Kristin Forbes, who served on the MPC from 2014 to 2017, told lawmakers she was concerned the BoE had not been clear enough about the scale of rate hikes that might come.”Anyone who is buying a home or might have a variable interest rate on a credit card needs to be aware that rates could go up to the 3%-type level that Adam has mentioned,” she said.Charles Goodhart, who served on the BoE’s first MPC after it gained independence in 1997 and has taught at the London School of Economics, speculated that rates might need to go even higher.”It will take nominal interest rates well above 4% to actually start having a significant effect on the housing market, and my bet would be that we will go over 5%,” Goodhart told the parliamentary hearing into inflation and economic policy. More

(Reuters) -France-based TotalEnergies and U.S. power company Duke Energy Corp (NYSE:DUK) each won offshore wind leases in federal waters off the coast of North and South Carolina on Wednesday, the Interior Department said in a statement.The auction generated $315 million in winning bids, split between Duke at $155 million and TotalEnergies at $160 million. It was TotalEnergies’ second U.S. offshore wind lease secured this year.The sale is part of a broad U.S. government push to put wind turbines in federal waters along every U.S. coastline. U.S. President Joe Biden has said the nascent offshore wind industry will create good-paying jobs while creating the carbon-free electricity needed to combat climate change.”Today’s lease sale is further proof that there is strong industry interest and that America’s clean energy transition is here,” Interior Secretary Deb Haaland said in a statement.Combined, the leases cover 110,091 acres (44,552 hectares) in the Carolina Long Bay area. Once developed, they could generate 1.3 gigawatts of offshore wind energy, or enough to power half a million homes, according to the Interior Department.The auction total was far less than the $4.37 billion in high bids generated at a February wind auction for leases off the coast of New York and New Jersey. Northeastern leases were widely seen as more attractive due to the region’s high power prices and state mandates to procure offshore wind power.TotalEnergies paid $795 million for a lease at the New York Bight auction. The company could not immediately be reached for comment.A trade group noted that the Carolina sale’s winning bids were 17 times higher than a winning bid in the same region five years ago.”With three separate wind projects now in the area, and potentially more on the way, the Carolinas are positioned to be the next American offshore wind hub,” National Ocean Industries Association President Erik Milito said in a statement.The auction marked Duke’s first foray into the U.S. offshore wind market. The company is the owner of regulated utilities in North Carolina, and is working with state regulators to achieve a state goal to reduce power sector emissions by 70% below 2005 levels by 2030. More

Saudi Aramco has overtaken Apple as the world’s most valuable company after higher oil prices pushed shares of the world’s biggest crude exporter to record levels, while a broader tech stock sell-off weighs on the iPhone maker. The Saudi Arabian oil company’s market capitalisation on Wednesday was $2.426tn, exceeding Apple’s $2.415tn by just over $10bn. It is the first time that Saudi Aramco has regained the top spot since 2020 and follows a broader sell-off in technology stocks since the start of the year.Apple became the first company to hit a $3tn market cap in early January, although its shares have suffered in recent months as investors reassess lofty valuations in the tech sector in light of a reversal in monetary policy and worries that inflation will weaken consumers’ spending habits.Thanks for reading FirstFT Asia. Here’s the rest of the day’s news — Emily.Coronavirus news digestChina yesterday dismissed rare World Health Organization criticism of its tough zero-Covid policy, saying it was “irresponsible”.New Zealand will reopen its borders two months ahead of schedule, ending more than two years of severe entry restrictions during the pandemic. Toyota warned its profits could fall by a fifth this year because of rising energy costs and a doubling in raw material prices following pandemic-related disruptions to supplies.Lead your team’s return to the office by “managing up”. Today’s Working It newsletter details tips on how to craft the best return-to-work policy.Five more stories in the news1. Hong Kong’s Cardinal Zen arrested under national security law Hong Kong police have arrested the Chinese territory’s former most senior Roman Catholic cleric, Cardinal Joseph Zen, and three other high-profile pro-democracy activists. 2. US inflation stays at 40-year high US consumer prices rose at an annual pace of 8.3 per cent last month, more than economists’ expectations and staying at a four-decade high, underscoring the urgency of the Federal Reserve’s push to stamp out inflation.Go deeper: Inflation has hit its highest level in decades in many countries, with Russia’s invasion of Ukraine pushing up energy and food prices and squeezing households’ real incomes. See how your country compares on rising prices.3. KKR approaches Blackstone for joint Toshiba bid The US private equity group has approached Blackstone to prepare a joint bid for Toshiba, setting the stage for a showdown with Bain Capital. 4. Russia signals plan to annex Kherson Local officials installed by Moscow in Kherson in southern Ukraine said they intended to ask President Vladimir Putin for the region to join Russia, in the clearest sign yet that the Kremlin plans to annex the province.

Protesters shout at Russian soldiers during a pro-Ukraine rally in Kherson in March. The protests have since fizzled out after troops violently dispersed them © AP

5. Global investment banks in China finally turn a profit All but one of the global investment banks in China finally managed to eke out a profit last year, according to figures reported by the banks and seen by the Financial Times. A regulatory shift by Beijing in the past two years has allowed western banks to take full control of their operations.The day aheadAsean summit The US will host the delayed Summit for the Association of Southeast Asian Nations, where officials are set to evaluate the Asean-US Strategic Partnership. Leaders of two Asean nations, the Philippines’ President Rodrigo Duterte and Myanmar’s junta chief Min Aung Hlaing, will not attend. (SCMP)India April CPI data Last month’s consumer price index figures are set to be released on Thursday. The data come a day after India’s central bank said it was set to raise its inflation forecast next month, Bloomberg reported. (Bloomberg)Foxconn Technology earnings The company’s results will give some indication of the extent of problems in the tech supply chain and whether Covid lockdowns in China will further undermine the situation, hitting consumer electronics manufacturers worldwide.Join us in person or online at the FT Business of Luxury Summit on May 18-20 to hear from luxury leaders including British Vogue, Valentino, Ermenegildo and YSL.What else we’re readingMarcos myths lift dictator’s son to power in Philippines The Marcos family’s comeback has been decades in the making. Their campaign was aided by what researchers said was co-ordinated online promotion of false historical narratives. “Marcos folklore was seeded on social media and they waited for it to get traction,” said one professor of global digital media.How SMBC Nikko fell from grace After an 18-month regulatory probe into alleged market manipulation during which one trader died after intense questioning, large clients have fled the tarnished Japanese brokerage. Business, morale and prospects at SMBC Nikko are “apocalyptically bad”, according to one veteran of the brokerage.‘New management, same story’ at Peloton Tuesday’s results left analysts asking old questions of the connected fitness company: is Peloton’s long-term vision of the size of its potential market realistic, and is it even wise to be pursuing a mass-market strategy when it built its brand on the fanatical loyalty of a wealthy but far smaller group of customers?Clues but few answers in childhood hepatitis mystery Scientists are mystified by a new form of hepatitis, which is thought to be afflicting more than 300 childrenacross the world and might be causing a wider, undetected wave of milder liver damage. Lockdowns, adenoviruses, Covid-19 and exposure to dogs have all been blamed. FT business books: May edition Addressing social class at work and navigating politics to get things done as well as a guide to “superior management effectiveness” — our Work & Careers team review this month’s top titles. Try this These electric chopsticks cut your salt intake. No, really. Japanese people consume about twice the amount of salt recommended. A new gadget purports to help.

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(Reuters) -The Dallas Federal Reserve on Wednesday named Lorie Logan as its next president, filling the vacancy left by Robert Kaplan’s departure last fall after an outcry over the ethics of his active stocks trading during the coronavirus pandemic. Logan, an executive vice president at the New York Fed and the manager of the Fed’s System Open Market Account, will start her new job on Aug. 22, the Dallas Fed said in a statement.The U.S. central bank is in the midst of its most rapid policy tightening in decades to deal with inflation that is rising at its fastest pace since the early 1980s. Data released on Wednesday showed consumer prices rose at an annual pace of 8.3% in April. Logan, 49, will join the presidents of the 11 other regional Fed banks and the Washington-based Fed Board of Governors in setting monetary policy for the world’s biggest economy. Her first policy meeting will be on Sept. 20-21.She will be the Dallas Fed’s first permanent female chief. A senior official in the New York Fed’s markets division since 2012, Logan currently manages the central bank’s $9 trillion portfolio of securities, cash and other assets. Those holdings roughly doubled during the pandemic as the Fed sought to ease financial conditions and bolster the economy, and under Logan the Fed is now poised to trim those assets, beginning next month, as part of its overall bid to raise U.S. borrowing costs and slow growth. “Lorie is a trusted colleague and dedicated public servant whose remarkable skill and experience with complex financial markets has informed our decisions and helped implement monetary policy to support the U.S. economy,” Fed Chair Jerome Powell said in the statement. Powell has signaled that he and fellow policymakers will likely follow last week’s half-percentage-point interest rate hike with at least two more hikes of the same size at upcoming policy meetings.The aim of the rises in borrowing costs is to slow household demand for goods and services and business demand for workers fast enough to cool price and wage pressures and bring inflation down to the Fed’s 2% target. Fed policymakers hope that can be done without undercutting the strong labor market or sending the economy into a prolonged downturn. As a Fed insider and a markets expert, Logan is a departure from the Dallas Fed’s last two presidents, both of whom came from outside the U.S. central bank’s system.Meredith (NYSE:MDP) Black has run the Dallas Fed on an interim basis since October after Kaplan, along with Boston Fed President Eric Rosengren, retired before their terms were out. They stepped down amid revelations of personal trading even as the Fed was buying trillions of dollars of assets to stabilize markets, lifting the prices of the kinds of securities that both men were trading.Four other Fed banks also have women leaders, including incoming Boston Fed President Susan Collins, currently provost of the University of Michigan. She will be the first Black woman to serve as a Fed bank chief when she starts on July 1. U.S. Senator Bob Menendez and fellow lawmaker Raul Ruiz, a U.S. representative, said they were disappointed the Dallas Fed board did not pick what could have been the Fed’s first Latino policymaker. “It missed an opportunity,” they wrote. More