Aurelia Butler

The Bank of England has intensified the squeeze on household finances with its first back-to-back interest rate rise since 2004 as the central bank forecast inflation will increase to 7.25 per cent in April.By a majority of five to four, the bank’s Monetary Policy Committee voted to increase the cost of borrowing on Thursday from 0.25 per cent to 0.5 per cent. The minority wanted an even larger increase to 0.75 per cent to get a grip on surging inflationary pressure.The pound climbed following the decision, with sterling increasing 0.2 per cent against the dollar to $1.360. Traders increased their bets on future rises in borrowing costs, with markets now expecting the BoE to lift interest rates to at least 1 per cent by May, and 1.5 per cent by November — a level that was not expected to be reached until March next year prior to Thursday’s announcement.The four votes for a half-point rate rise were “a hawkish turn markets did not expect”, said Anna Stupnytska, an economist at Fidelity International.The rise in official interest rates, alongside the highest rate of inflation for more than 30 years, would squeeze disposable household incomes by 2 per cent this year, with a further 0.5 per cent hit in 2023. That would be the biggest annual reduction in spending power since at least 1990, said BoE officials.This would depress spending and reduce the UK growth rate to a crawl of about 1 per cent a year. However, the pain for households would help bring inflation down towards the bank’s 2 per cent target within two years, the MPC said.In an effort to increase the power of monetary tightening and bear down on inflation, the MPC voted unanimously not to reinvest any of the £875bn of government bonds it has bought under quantitative easing programmes when they mature. Under the passive quantitative tightening programme, the BoE said it would not reinvest the proceeds of £28bn of maturing government bonds in March and that £70bn of bonds would mature and would not be reinvested during 2022 and 2023.The bank will also complete a sale of the £20bn of corporate bonds it holds as part of the £895bn total QE programme built up since 2009, by the end of 2023.UK government bond prices fell on the news that the bank will begin to reduce the stock of gilts it holds. The 10-year gilt yield climbed 0.11 percentage points to 1.36 per cent.The MPC did not take the government’s package of support for energy bills into account when it set interest rates, officials said, but they added that this would not have had a material effect on its interest rate decision.The entire committee said there was still a need for “further modest tightening of monetary policy” in response to the inflationary threat “in coming months”.According to the minutes of the meeting, the majority of the MPC members who voted for the quarter point rise said that inflation would remain “materially” above the bank’s 2 per cent target this year while the economy weakened as households were squeezed. Inflation would remain over 5 per cent by the end of the year, the BoE said.The bank also reduced its economic forecast significantly, saying that UK economic growth would soon “slow to subdued rates” of around only 1 per cent a year.

The committee’s vote for a small increase in rates reflected “the risks from the possibility of stronger domestic wage and price pressures in the near term”, but also the “potential for inflation to fall more quickly” if energy prices came down. Members preferred gradual movements in interest rates.The minority who preferred an immediate half point rise in interest rates were worried about the repeated inflation forecasting errors made by the BoE in the past year. They saw emerging signs that companies were expecting to raise prices significantly and that workers were demanding and receiving large pay rises. They said these features “could make CPI inflation more persistent” than the central forecasts predicted.The five members voting for the quarter point rise were Andrew Bailey, governor, Ben Broadbent and Sir Jon Cunliffe, two of his deputy governors, Huw Pill, the BoE’s chief economist, and Silvana Tenreyro, one of the external MPC members.The four voting for a larger rise were Sir Dave Ramsden, another deputy governor, and Jonathan Haskel, Catherine Mann and Michael Saunders, three external members of the MPC.  More

Good morning. Today we are looking at the ongoing troop build up in eastern Europe and how Miami became the most important city in America. But first, warnings of slowing growth from Facebook and Spotify. Investors wiped almost $200bn from the market valuation of Facebook-owner Meta as the company warned that its users were spending more time on newer rivals such as Chinese-owned TikTok.Shares in the company plummeted more than 20 per cent in after-hours trading, putting them on course for their worst day since the social media group listed in 2012. The share price fall has unsettled investors in Asia and Asia today. Meta blamed “increasing competition” for the disappointing results and Apple’s recent privacy changes. “There’s a clear trend where less data is available to deliver personalised ads,” Meta chief executive Mark Zuckerberg said on a call with analysts after the results were released.The social media group is also investing heavily in the metaverse which it hopes will fuel future growth but spending on the new project ate into fourth-quarter profits.Meta was not the only technology company to warn growth is slowing. Spotify, which has been embroiled in a controversy surrounding Joe Rogan, said subscriber growth would slow significantly in the current quarter. The gloomy outlook sent shares down as much as 23 per cent in after-hours trading. Daniel Ek, Spotify chief executive, said it was “too early to know” whether the backlash over the popular podcaster would cost the streaming service subscribers.Shares in PayPal also tumbled after the US payments group slashed its growth forecasts. It said many of the new accounts opened during the pandemic had failed to generate any meaningful business. Opinion: Rogan’s thoughtful response to public criticism illustrates why his show has become the platform’s most popular, writes Jemima Kelly.Thanks for reading FirstFT Americas. What do you think of today’s newsletter? Tell me by emailing [email protected] — GordonFive more stories in the news1. US sends 2,000 extra troops to Europe US President Joe Biden has ordered the additional deployment to strengthen Nato’s response to a possible Russian invasion of Ukraine. Washington also said it would redeploy roughly 1,000 troops from Germany to Romania. Biden and Volodymyr Zelensky, Ukraine’s president, are trying to play down any sense of division.Too hot to handle? Hedge funds are scooping up Russian and Ukrainian assets after declines since last autumn, while institutional investors are staying clear.Go deeper: What is behind the crisis and how might a conflict play out? Here are five books about Vladimir Putin, Russia and former Soviet republics.The FT View: There are limits to western sanctions on Russia. The US and Europe must be prepared to take their share of economic pain.2. US special forces carry out anti-terror attack in north-west Syria US special forces carried out what appeared to be one of the biggest assaults of its type in north-west Syria overnight. The Pentagon did not say who, or what, was targeted in the raid but a human rights group said casualties included two children and a woman.3. CNN chief Jeff Zucker resigns The longtime head of the network and a towering figure in US television news has resigned after failing to disclose a romantic relationship with a colleague. The affair came to light during an investigation into claims against former host Chris Cuomo.4. Opec and allies agree oil production increase Opec+ agreed yesterday to boost its production quota by another 400,000 barrels a day in March, its eighth consecutive monthly increase, even as data showed some producer countries were struggling to keep pace with the rises.5. Kim Jong Un has ‘withered away’ The North Korean leader has “suffered” on behalf of his people during chronic food shortages, according to a state television documentary that has intensified speculation about his health and the future of the regime.

A slimmed-down Kim Jong Un inspects a missile munitions factory in North Korea last week © Eyepress/Reuters

Coronavirus digestNew Zealand is to gradually reopen its borders to citizens, workers and international travellers as support for prime minister Jacinda Ardern drops. Switzerland, meanwhile, is considering ending all pandemic restrictions on public life on February 16. Turkey’s official inflation rate has reached 48.7 per cent, the highest level since Recep Tayyip Erdogan’s ruling party came to power almost two decades ago.An Omicron coronavirus sub-variant named BA.2 has become the dominant strain in Denmark, India and South Africa. Here’s what we know about it.Megan Greene, senior fellow at Harvard Kennedy School and chief economist at Kroll, urges the Federal Reserve to be cautious as it prepares to tighten monetary policy. The US workforce is largely in cyclical, not structural, change, she says. Are you thinking about changing jobs? Take our latest poll.

The day aheadMonetary policy The Bank of England is expected to announce a rise in interest rates from 0.25 per cent to 0.5 per cent, the first back-to-back increase since 2004. Economists expect the ECB to keep interest rates negative but investors are beginning to bet on a rise this year.Amazon earnings Analysts think the ecommerce group may have ended 2021 with its best quarter ever. It is forecast to have generated more than $137bn in revenue in the three months ended December 31. Also reporting today are drugmaker Merck, oil producer ConocoPhillips, private equity firm Carlyle Group and carmaker Ford.US jobless claims New applications for employment benefits rose by 245,000 in the week ended January 29, economists predict, compared with 260,000 a week earlier. US Senate hearings Lisa Cook, a professor of economics at Michigan State University, Philip Jefferson, a former research economist for the Fed’s board, and Sarah Bloom Raskin, a former deputy secretary of the US Treasury during the Obama administration, are set to be grilled by the Senate Banking committee. The three are expected to face a rocky ride during the confirmation process.Joe Biden visits New York City The president is meeting Eric Adams, the city’s newly elected mayor. He hopes that Adams will help him reassure anxious voters the Democrats can be trusted to address a rise in violent crime across big cities that has been exacerbated by the pandemic.

Eric Adams, speaking at the funeral of police officer Jason Rivera. Five police officers have been shot in New York since the beginning of the year © Mary Altaffer/AP

What else we’re reading How Miami became the most important city in America The “Miami Moment” really took off when Covid hit. In the 12 months from July 1 2020, far more Americans moved to Florida than any other state — 220,890 of them. But what’s happening in Miami is more than a migration of people. It’s also a migration of money.Satya Nadella: ‘Being great at game building gives us permission to build the next internet’ In his first interview since the Activision deal was announced, the Microsoft chief executive explains the thinking behind the $75bn video game maker acquisition. This is the first in a new series of monthly ‘Tech Exchange’ interviews. Beijing Olympics: a front line in the US-China cold war Multinational sponsors have been accused of ignoring the plight of more than 1mn Uyghur Muslims detained in China by backing the Beijing Winter Olympics. On the eve of the games, FT reporters explore what a tense US-China relationship means for corporate America.Polish your storytelling skills to win a pay rise Here are some simple tips for improving your odds to secure a rise in pay and ensure the process goes smoothly. By borrowing from behavioural science you are giving yourself the best chance of getting a manager’s attention, says Grace Lordan.Put your stockpicking skills to the test Turbulent markets can create opportunities for the quick-thinking investor. Pit your wits against FT journalists in our annual stockpicking contest. Be quick! Entries close at midnight GMT on Sunday, February 6.Wellbeing and fitnessReady to head out and socialise again? This collection of stories will help you navigate the life-long art of making friends.

Arthur B Timothy, ‘Party Frocks’ © Gallery 1957 More

LONDON (Reuters) – The euro and sterling edged lower as the ECB and BoE prepared to face their growing inflation challenges later on Thursday while stock markets turned red again after a disappointing status update from the firm formally known as Facebook (NASDAQ:FB). Europe’s main bourses were down 0.4% early on (EU) as the prospect of a second UK interest rate hike in three months, a more hawkish ECB and the shock of Wednesday’s 20% plunge in Facebook owner Meta’s shares ended a 3-day rally.In the currency market, the defensive mood allowed the dollar to regain its footing. Inflation pressures were weighing on bonds, although with so much central bank activity later it felt like the real action was still to come.The Bank of England is forecast to raise rates to 0.5% later, with the UK government also expected to announce an energy bill subsidy. Over in Frankfurt, the European Central Bank is not likely to offer up policy changes, but this week’s record high euro zone inflation reading and recent strong labour data have raised expectations for more hawkish shift in tone.”The equity markets took a beating yesterday,” said Societe Generale (OTC:SCGLY) analyst Kit Juckes. “They haven’t moved much further this morning, but the risk-positive move we had at the start of the week has definitely run out of steam ahead of all the central bank meetings”. U.S. stocks futures were sharply lower, especially for the tech-dominated Nasdaq after Facebook, Instagram and Whatsapp firm Meta’s disappointing earning and outlook had vaporised $200 billion of its market value.Other social media companies also fell hard after the bell, including Twitter (NYSE:TWTR), Pinterest (NYSE:PINS) and Spotify (NYSE:SPOT), which has been beset by a row over COVID vaccination misinformation.”Investors looking at Meta are starting to realize that buying their stock is no longer mostly an investment into their ad platform,” said Flynn Zaiger, CEO of social media agency Online Optimism.”Investing in Meta now looks more like a commitment that you believe that the metaverse will replace much of the internet consumers’ experience today.” (Graphic: Currency markets in 2020, https://fingfx.thomsonreuters.com/gfx/mkt/myvmnjkeypr/Pasted%20image%201643811970966.png) 50 PERCENT CLUBIn emerging markets pressure was building on Turkey’s lira again after inflation there came in at nearly 50% and Russia’s rouble wobbled again as tensions over Ukraine were fanned by the movement of 3,000 U.S. troops to eastern Europe.It came as oil prices also eased after OPEC and its allies stuck to planned moderate output increases and U.S. ADP jobs data had been weaker than hoped.Brent crude fell 77 cents, or 0.8%, to $88.71 a barrel. U.S. West Texas Intermediate crude CLc1. was down 79 cents, or 0.9%, at $87.49 a barrel.”This morning’s dip might be a result of the shockingly low U.S. ADP employment print last night, but we believe the supply squeeze may drive oil prices higher through this year,” said Howie Lee, economist at OCBC in Singapore. More

NEW DELHI (Reuters) -State-run Life Insurance Corporation of India’s (LIC) embedded value has been finalised at more than 5 trillion rupees ($66.82 billion), a government official who is overseeing what is expected to be the country’s largest IPO said on Thursday.Investors are eagerly waiting for the government to indicate LIC’s embedded value – a measure of future cash flows in life insurance companies and the key financial gauge for insurers – when it releases the initial public offering (IPO) draft prospectus, expected in a matter of days.While there has been speculation about the number in Indian media – from as low as $53 billion to as high as $150 billion – this is the first time the government, which owns 100% of LIC, has commented on the matter.The embedded value will help establish the market valuation of LIC and determine how much money the government raises in the flotation. That will be crucial for the government to help meet its divestment targets and keep its fiscal deficit in check.”I would say the embedded value could be more than 5 trillion rupees and the enterprise value will be multiples of that,” Tuhin Kanta Pandey, secretary, department of divestment, told Reuters in an interview.Media reports in India have projected LIC’s market valuation at around four times the embedded value.LIC has a majority share of the life insurance market in India. The government, which hopes to raise as much as $12 billion from selling a stake in the IPO, expects the proceeds will help it bridge a deficit gap this fiscal year.Pandey said the government planned to issue a draft IPO prospectus to investors as early as next week.PUSH TO PRIVATISATION Prime Minister Narendra Modi’s government slashed its divestment target to 780 billion rupees ($10.43 billion) in the year ending in March, from an earlier budgeted target of 1.75 trillion rupees. It is banking on LIC’s initial public offering to meet its revised target. It has so far raised about 120 billion rupees by selling stakes in other companies. Selling 5% of LIC’s stock to gain that amount could be ideal but the government was also willing to sell as much as 10%, government and banking sources have said.Pandey, however, declined to disclose the size of the stake the government would sell in the first round.He said after selling national carrier Air India successfully, the listing of the LIC would be a major event for markets, aiming to attract retail investors and to build a public opinion about the privatisation.”It is the LIC moment for Indian markets and it will add depth,” he said noting that it could help attract more investors to invest in state-run companies.The listing of LIC could make it as one of the top five largest companies in terms of market cap, joining the club of Reliance Industries, TCS and HDFC Bank.LIC is not likely to issue fresh shares in the primary market and the entire issuance is likely to be sold in the secondary market, Pandey said.”I don’t see any need for capital for LIC, it is sufficiently capitalised,” he said, adding LIC could sell its stake in IDBI Bank in the next fiscal year. Under the current plans, the government would keep its majority of its stake in the LIC. The stake cannot come below 51% by law and that will be retained, he said, and even in 5 years it could not sell more than 25% of its stake in LIC. ($1 = 74.8250 Indian rupees) More

A look at the day ahead from Sujata Rao. The world’s largest economy is predicted to record GDP growth at a 37-year high of 5.5%, with data due later on Thursday. Some such as JPMorgan (NYSE:JPM) reckon the figure could be as high as 7.5%. We will also likely see weekly jobless benefits claims dropping further. That, in a nutshell, is why the U.S. Federal Reserve feels there is “quite a bit of room to raise interest rates”.Could there be more than four rate rises this year? Powell did not deny that possibility, so markets have started to price a fifth move.Accordingly, Treasury two-year borrowing costs hit 23-month highs, shrinking the gap with 10-year yields. And on t-bills, the shortest-dated debt segment, Tradeweb notes a sharp steepening, with the gap between the three- and six-month yields at the steepest since 2018, and more than double from a month-ago period. Similar steepening is notable between other bill maturities in a sign more tightening is being priced. So the stock market selloff that had abated pre-Fed is back in full swing, with world stocks down 0.6%; European and Wall Street looking set for another tumble.But if buyers are running scared, there are bargain hunters of a different sort — billionaire William Ackman said he had snapped up $1 billion worth of Netflix (NASDAQ:NFLX) shares since last Thursday’s market tumble.Companies, meanwhile, continue to deliver good news; Tesla (NASDAQ:TSLA) for instance predicted 50%-plus growth this year, while Deutsche Bank (DE:DBKGn) posted its biggest profit since 2011. But with buyers still in hiding, Tesla shares tanked in after-hours trade.Key developments that should provide more direction to markets on Thursday: -China’s industrial firms saw December profits grow at slowest pace in 1-1/2 years-German consumer morale improves slightly-New Zealand inflation at three-decade high-South Africa expected to raise rates by 25 bps-U.S. durable goods/advance Q4 GDP reading/initial jobless claims-U.S. 7-year note auction-U.S earnings: Blackstone (NYSE:BX), Dow chemicals, Southwest airlines, McDonalds T Rowe Price (NASDAQ:TROW), Mastercard (NYSE:MA), JetBlue, Apple (NASDAQ:AAPL), Visa (NYSE:V), Mondelez (NASDAQ:MDLZ), -European earnings: LVMH Moet Hennessy Louis Vuitton, Dr Martens, UniCredit Britvic, St. James’s Place STMicroelectronics, SAP, Deutsche Bank, IG Group, Diageo (LON:DGE), Sabadell, SEB, Polymetal More