Aurelia Butler

How well did you keep up with the news this week? Take our quiz.France will block entry to UK tourists, tightening its border restrictions in an effort to slow the spread of the Omicron coronavirus variant. The decision came as EU leaders expressed heightened alarm over the renewed surge in Covid-19 cases and tried to maintain a common approach to travel within the bloc. Travel from the UK to France will be largely limited to French nationals, residents and their families, although exceptions have been made for students and some professions, such as doctors, which have a work-related reason to enter the country. The French prime minister’s office said the curbs would apply from midnight on Friday.More on Omicron’s impact: The head of Delta Air Lines said he expected the Omicron coronavirus variant to affect bookings early next year, even as passengers return to the skies for holiday travel.Have your holiday plans changed due to the Omicron variant? Share how the surge in Covid cases is affecting you at [email protected]. Thanks for reading FirstFT Asia. Here’s the rest of today’s news — EmilyFive more stories in the news1. US blacklists Chinese biotech groups over repression of Uyghurs The US is placing China’s Academy of Military Medical Sciences and 11 institutes involved in biotechnology on an export blacklist for allegedly helping Beijing engage in the repression and surveillance of Uyghurs.2. Central banks battle inflation Bank of England governor Andrew Bailey insisted the central bank had no choice but to raise interest rates owing to the risk of inflation staying persistently too high. The European Central Bank will scale back its crisis bond-buying and the Bank of Mexico has raised interest rates more than analysts had expected as it faces its highest inflation in two decades.Go deeper: The Federal Reserve’s shift away from the ultra-loose monetary policy despite a worrying wave of new coronavirus cases underscores the immense pressure piling up on the central bank to do more to tame inflation.

3. Vietnam’s widening crackdown on dissent A Vietnamese court yesterday jailed a human-rights activist for 10 years, the fourth dissident to have been given a stiff prison sentence in three days in what campaigners said was an intensifying crackdown by communist authorities on peaceful dissent.4. Turkey raises minimum wage by 50% President Recep Tayyip Erdogan announced a 50 per cent rise in the country’s minimum wage in an effort to protect the Turkish people from soaring inflation just hours after the country’s central bank cut interest rates for the fourth consecutive month.5. Chinese creditors sue Evergrande for claims totalling $13bn Chinese creditors have sued China Evergrande for more than $13bn in allegedly overdue payments, as domestic companies owed money by the developer race against offshore bondholders to secure repayment.Coronavirus digestThe value of Japan’s imports in November was the highest in decades, reflecting higher commodity and fuel prices around the world.The Reserve Bank of Australia may end its asset purchase programme as early as February. Comments from Governor Philip Lowe highlighted the strength of Australia’s economic recovery from the pandemic. The prime minister of South Korea announced new restrictions on social gatherings, as it struggles to contain a steady rise in coronavirus infections.With Covid-19 cases in New York resurging, Goldman Sachs has ordered teams that have not already held festive events to cancel any remaining plans.The European Medicines Agency could approve the Novavax two-dose coronavirus vaccine as early as next weekThe days aheadJapan monetary policy decision Ahead of the Bank of Japan’s interest rate decision, Governor Haruhiko Kuroda said while consumer inflation may approach 2 per cent, the central bank would maintain its ultra-loose monetary policy. (Reuters) Anniversary of self-immolation of Tunisia’s Bouazizi The nation marks the 11th anniversary of the event that started the Arab Spring uprisings — the self-immolation of Mohamed Bouazizi in protest at the confiscation by police of his vegetable cart.UK retail figures Tighter restrictions owing to increasing Covid cases will inevitably hit certain sectors such as retail and transport, though it could be a boon for some retailers, such as online grocery delivery companies. Chile’s presidential run-off election The South American nation of 19m faces a bitterly fought presidential run-off election on Sunday between two men with diametrically opposed views. At stake is not only the immediate future of Chile, but also the verdict on four decades of free-market economic policies.What else we’re reading, watching and listening toTaiwan opposition clings on for political relevance The KMT continues to embrace the idea that Taiwan and the mainland both belong to one China. That belief is increasingly out of step with public opinion as an overwhelming majority of Taiwanese reject unification with China, putting the party’s support into a tailspin.A trip into the metaverse with Nick Clegg Instead of a meeting in Europe, the Facebook defender-in-chief offers to speak . . . in the metaverse, the immersive digital world hyped as a successor to the internet. So Henry Mance donned a bulky virtual headset, signed away his data and logged in to a simulated meeting room. Watch their conversation here.

Video: Nick Clegg’s first interview in the metaverse

Beware the property trap ensnaring young buyers Soaring demand for property during the pandemic means that annual house price inflation is 10.2 per cent. This makes homeowners feel considerably richer — on paper at least. But it has the opposite effect on first-time buyers, who are finding it increasingly hard to get the numbers to stack up.‘A chef of incomprehensible intensity’ Behind King’s Cross is a tiny, four-seater hole-in-the-wall that bills itself as a Curry Laboratory. Hiden is chef Hideaki Yoshiyama’s extended investigation into karē raisu, Japanese curry and rice. And it is superb, writes FT’s Tim Hayward. The underside of globalisation On this episode of the Rachman Review podcast, Gideon talks to Mark Leonard, director of the European Council on Foreign Relations, about the ways in which global powers try to exert influence over others in an interconnected world. Mark Leonard is author of The Age of Unpeace: How Connectivity Causes Conflict. FashionThis has been a terrible year for style, writes Unhedged author and style columnist Robert Armstrong. A miserable follow-up to an execrable 2020, he adds. To get the 2022 “fightback” under way, he offers a list of nine style resolutions.

Looking great in 1958: Ugo Tognazzi, Caprice Chantal, Anthony Steel and Anita Ekberg dine at Saint-Vincent Casino, Piedmont © Publifoto Milano/AFP via Getty Images More

The Bank of Mexico has raised interest rates more than analysts had expected as it tries to smooth over a rocky leadership transition while the country faces its highest inflation in two decades.Banxico’s board voted 4-1 on Thursday to raise rates 0.5 percentage points to 5.5 per cent after data showed annual inflation hit 7.37 per cent in November, its highest level in 20 years. Gerardo Esquivel, who voted against the rate rise, had advocated instead for a smaller 0.25 percentage point increase.“The balance of risks for the trajectory of inflation within the forecast horizon deteriorated further and remains biased to the upside,” the board said in its statement.Analysts had on average expected the board to increase rates 0.25 percentage points as it balances soaring price rises, fragile growth and expectations that the US Federal Reserve will begin raising rates from rock-bottom levels next year. The bank simultaneously faces an internal challenge in smoothing over a turbulent leadership transition. In November, Andrés Manuel López Obrador, Mexico’s president, shook markets when he withdrew his nominee for central bank governor and replaced him with a little-known public sector economist.Victoria Rodríguez Ceja has since been officially confirmed as Banxico’s next governor and will be the first woman to hold the role, although the opposition has questioned her monetary policy experience and her independence from the president. Rodríguez Ceja, who is set to take over from governor Alejandro Díaz de León on January 1, has vowed to fight inflation, not touch international reserves and maintain the bank’s autonomy.As with many countries, Mexico has been trying to tame soaring prices. From Brazil to Poland, central banks around the world are tightening monetary policy in an effort to contain inflation. The Federal Reserve is also taking a more aggressive approach, and said on Wednesday that it expected to raise interest rates three times next year.In Mexico, the bigger rate increase was justified by faster price rises, a higher minimum wage, a weaker peso and uncertainty over the transition to a new governor, said Alonso Cervera, chief economist for Latin America at Credit Suisse.“It was necessary for the central bank to accelerate the tightening based on the latest inflation numbers and based on other developments,” he said. However, he cautioned that this pace of tightening may not be maintained.“The market shouldn’t conclude that it’s 50 [basis points] going forward.”The bank is also contending with a fragile recovery in Mexico’s economy, which saw a sudden contraction in the third quarter. More recent data suggested a rebound, but analysts have revised down their gross domestic product growth projections for 2021 to 5.7 per cent, according to a monthly Banxico survey.

“Growth data have been disappointing, and the 4Q rebound does not seem to be strong,” analysts at Morgan Stanley wrote before the decision.The peso on Thursday strengthened by the most in a month against the dollar. It was last at 20.78 pesos to the dollar, a 6.3 per cent move from late November, when it hit its weakest level in 13 months.Uncertainty over the central bank’s leadership has weighed on foreign investment. International investors pulled almost $1.3bn from government securities in November, while foreign investments in equities also show outflows of nearly $4.8bn to November, according to analysts at BBVA.“We would expect foreign inflows to remain stagnated, as uncertainty regarding the current tightening cycle will continue due to the probable noise resulting from the new composition of Banxico’s board,” the analysts wrote before Thursday’s announcement.Additional reporting by Kate Duguid in New York More

Bank of England governor Andrew Bailey on Thursday insisted the central bank had no choice but to raise interest rates, saying if it had done nothing, it would risk inflation staying persistently too high. This was the BoE putting its new slogan that it is “in the price stability business” into action, given consumer price inflation is currently running at a decade high of 5.1 per cent, compared with the central bank’s target of 2 per cent. But the first interest rate rise in more than three years posed two questions: why tighten monetary policy now rather than early next year, when economic uncertainty unleashed by the new Omicron coronavirus variant may have eased? And what impact will a tiny 0.15 percentage point increase in rates, to 0.25 per cent, have on the economic recovery and people’s lives?With the BoE Monetary Policy Committee having surprised financial markets and economists for two consecutive meetings, by holding rates in November and then raising them on Thursday, Bailey will be aware that he is seen as an unpredictable communicator on monetary policy. Allan Monks, economist at JPMorgan, summarised the MPC rate rise as the “right decision, wrong month”, saying the action would have made much more sense in November, when inflation was already surging and Omicron was not on the radar. The BoE rejected such criticisms. Instead its reasoning can be summarised as it responding to three “Ds” that have transpired over the past six weeks. First, new data suggests the inflationary threat has intensified. Second, new deliberations by the MPC’s nine members show them concerned about the prospect of persistent price growth. Third, new discussions with companies have highlighted the need to act swiftly. The data highlighted by the BoE mostly came from the labour market, where MPC members noted there was “little sign” the end of the government’s furlough scheme in September had weakened demand for workers, solidifying their view that “the labour market is tight and has continued to tighten”. The MPC’s persistent underestimation of inflation this year has also concentrated minds, with members now expecting the annual rate of price growth to peak now at about 6 per cent, compared with 4 per cent in their forecast four months ago. This has caused a change in deliberations on the MPC. Instead of seeking to explain away high price growth as “transitory” or “temporary”, members have accepted that above target inflation is likely to persist.And while members still expect the rate of inflation to fall back in the second half of 2022, they now worry that companies and workers will respond to jumps in costs by raising prices and increasing wage demands. The MPC now expects goods price inflation to remain “well above” pre-pandemic levels in the months ahead. It anticipates services inflation to “increase somewhat further”, and food prices to “rise further, reflecting cost increases over recent months”. One of the things that has alarmed MPC members most has been the regular discussions it has with businesses across the UK, including via its survey of decision makers in the corporate world.These all suggested that inflation was likely to be persistent, with companies reporting they have already increased their prices by almost 5 per cent over the past year, and are planning to raise them by another 4.2 per cent by November 2022. The BoE survey of decision makers also suggested almost 60 per cent of companies were finding it “much harder than normal to recruit” employees. The greatest pressures were in sectors with well known labour shortages: hospitality, transport and logistics. If the three Ds explained the MPC’s new concern about persistent inflation and its members’ eight to one vote to raise rates, the 0.15 percentage point increase appears small compared with the problems the BoE has identified. Higher interest rates normally work by seeking to restrain company and household spending, partly by increasing the cost of borrowing, thereby lowering demand and bringing it back in line with the output the economy can supply without prices going up excessively.

An interest rate of 0.25 per cent will not change much directly, given the vast majority of mortgage borrowers now have fixed rate loans. Charles Roe, director of mortgages at UK Finance, a trade body, said: “Over 74 per cent of mortgage customers are on a fixed rate product and will see no immediate change to their mortgage payments.”The rate rise was therefore designed more as a warning shot to companies and workers, so that they do not bake higher inflation into pricing and wage decisions over the months ahead.To discourage people from thinking the BoE will allow high inflation to persist, the MPC said there was a “strong case” for immediate tightening of monetary policy along with further “modest” increases in rates to come “in order to maintain price stability in the medium term”. “Maintaining the current monetary policy stance when CPI inflation was materially above the 2 per cent target . . . might cause medium-term inflation expectations to drift up further,” it added. George Buckley, economist at Nomura, who correctly predicted the BoE would act on Thursday, said the signal on rates was much more important than the amount by which they had risen. “The bank clearly did not want to be in a position in two to three months’ time, whereby inflation has risen further, the virus is once again in retreat, yet it had failed to get policy rates off the ground,” he added. More

Global central banks are at odds over how long the surge in inflation will persist. On Thursday, the UK became the first G7 economy to raise interest rates since the start of the pandemic. The US Federal Reserve has said that it will accelerate the reduction of its monthly bond purchases and signalled plans to raise rates more aggressively in 2022. Meanwhile, the European Central Bank is only slightly reining in stimulus.At issue is the need to balance rising consumer price pressure against the potential hit to economic growth from the Omicron coronavirus variant. One camp claims increases are driven by supply-chain disruptions and will prove transitory. The other expects prices to continue to rise for some time.In the US, where consumer price increases are at a near 40-year high, gains have been concentrated in goods most affected by a combination of supply constraints and rising demand. Shortages of things such as semiconductors will ease once supply-chain disruptions caused by Covid-19 become less severe.But dismissing inflation as “pandemic-related” and therefore bound to pass risks underestimating the pandemic’s duration. More variants are expected to be generated. The Fed has acknowledged that this means there is a good chance inflation will remain high. There is also the psychological component to inflation. If consumers expect prices to keep going up, they will try to purchase more now. This in turn will push prices even higher. That could eventually spill over into wages, creating a wage-price spiral. Inflation becomes self-perpetuating. For now, both the stock and bond markets seem to take the view that inflation will moderate. The yield on benchmark 10-year Treasuries, at 1.42 per cent, remains less than half the level it was in 2018. But that view underestimates the extent of structural changes in the global economy that have been accelerated by the pandemic. The days of low inflation and strong growth are out of reach. More