Economy

Good morning. We continued to learn more about the collapse of Silicon Valley Bank and its knock-on effects over the weekend. Below, we have the latest on the Federal Deposit Insurance Corporation’s auction to find a new buyer for the bank, after taking it over on Friday. Meanwhile, the UK is preparing a dramatic intervention to keep tech businesses safe from the damage caused in the wake of SVB’s collapse. Get the latest news on SVB on FT.com.Here’s what to keep tabs on today: SVB latest: The bank will reopen for insured depositors under the newly formed Deposit Insurance National Bank of Santa Clara. Customers with more than $250,000 in accounts will learn if they can recover their funds.Aukus defence pact: President Joe Biden meets British prime minister Rishi Sunak and his Australian counterpart Anthony Albanese in California.Economic data: India releases its February consumer price index inflation rate data today.Thank you for reading FirstFT. Today’s top news1. US regulators are seeking a buyer for Silicon Valley Bank, which was taken over by the Federal Deposit Insurance Corporation on Friday. Policies were being discussed to ensure depositors have access to their funds, despite dismissing the idea of a bailout. Read the full story.The fallout: The bank’s collapse has left start-ups scrambling to find emergency loans and pay staff as founders fear being held personally liable for unpaid wages.Chinese start-ups: The failure of Silicon Valley Bank has left many Chinese funds and tech start-ups in the lurch — and also raises questions over the fate of its joint venture with Shanghai Pudong Development Bank.2. UK chancellor Jeremy Hunt is preparing a cash lifeline for tech companies hit by Silicon Valley Bank collapse, with senior founders warning of “carnage” if they are unable to pay wages and bills in the coming week. Here’s what we know about plans for a dramatic intervention.3. Saudi Aramco posts record $161bn profit on back of strong crude prices, increasing its quarterly payout to shareholders to almost $20bn as the largely state-owned oil company cashed in on a tumultuous year in energy markets.4. Xi Jinping retains China’s central bank head Yi Gang in his post, a move analysts said would send a positive signal to markets as Beijing prepared to transfer some of the central bank’s regulatory functions to the state financial regulatory commission.5. Tim Cook bets on Apple’s mixed-reality headset to secure his legacy. The headset will be Apple’s first new computing platform to have been developed entirely under Cook’s leadership, and is a next-generation hardware product that some inside the company believe might one day rival the iPhone.News in depth

The rapid collapse of Silicon Valley Bank has stunned the venture capital and start-up community, but its fate had been sealed almost two years earlier © Justin Sullivan/Getty Images

In early March, 40 chief financial officers from various technology groups gathered in the Utah ski resort of Deer Valley for an annual “snow summit” hosted by Silicon Valley Bank, a crucial financial institution for start-ups. Barely a week later, several of the finance chiefs were exchanging frantic messages about whether they should continue to hold their cash in the bank. While its collapse happened quickly, problems at Silicon Valley Bank had been festering for years.We’re also reading . . . Resolving the SVB implosion: The Fed should tolerate greater banking system concentration while seeking to contain moral hazard and avoiding lower rates, writes Queens’ College, Cambridge president Mohamed El-Erian. Therapy at work: Linklaters, The Bank of England and JPMorgan Chase are all making virtual and on-site psychologists available, signalling to staff that managers are supportive of their teams. Here’s how it works (and why it helps).MBA in the metaverse: The Vienna University of Economics and Business (WU) has offered a tantalising prospect to people who want to learn but don’t like to leave the house: join ‘virtually, for a postgraduate course in the metaverse’. Interested in applying for a Masters of Business Administration? Sign up for MBA 101 for free to learn everything you need to know about applying to business school — in just six weeks.Chart of the dayChina has emerged from the Covid-19 pandemic as a leading exporter of cars: at the end of 2019, the country was exporting about 600,000 cars a year. Three years later, it is exporting 2.6mn.

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Take a break from the newsTrieste, the coastal capital city of the Friuli-Venezia Giulia region in north-east Italy, is having a bit of a moment. More on the comeback kid of Europe.

Sant’Antonio Taumaturgo church seen from the Trieste Grand Canal © Camilla Glorioso

Additional contributions by Tee Zhuo and Darren Dodd More

Hello and welcome to the working week.As you read this, I will have just returned from a high-powered transport meeting deeply relevant to this week’s news agenda. OK, it’s my youngest son’s birthday party at the local go-kart track. But he and his classmates will have been tearing around the circuit in the venue’s battery-powered four wheelers. Electric cars and smarter energy use are vital for our future, and they will be a focus for discussion at various venues this week.On Tuesday, the EU will unveil its Net Zero Industry Act, an effort to regain the initiative in clean technology production in Europe. The plan, according to draft proposals seen by the FT, is to enable homegrown green energy businesses to produce 40 per cent of the bloc’s capacity needs in five low carbon technologies — solar, wind, heat pumps, batteries and electrolysers. The EU’s act is an attempt to keep these kinds of companies on its side — see the note about Volkswagen’s results below — and the legislation can be seen as a direct response to the US Inflation Reduction Act, announced last August, which is providing $369bn in tax credits and subsidies for clean energy technologies.Power, or rather the cost of it, will be a key focus for the UK chancellor Jeremy Hunt’s Budget day speech on Wednesday, alongside defence spending for Ukraine, measures to encourage a return to work and perhaps childcare help. The limit on the price households pay per unit of gas and electricity under the energy price guarantee scheme is scheduled to increase to £3,000 a year from April 1. But reports in recent weeks suggest that the chancellor may keep the limit at its current level of £2,500. Hunt has had some good fortune with better than expected figures for the economy (see chart below) and public sector borrowing, but the giveaways are expected to be modest — leaving room for headline-grabbing tax breaks closer to the next general election, at least a year away. Click here for news in the build up to Wednesday’s speech as well as coverage on the day.

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Elsewhere in British politics, the ballot to choose a new leader for the Scottish National Party, and therefore the new first minister at the Holyrood parliament, opens on Monday. The contest is already producing heated debates between the three candidates, and there’s “a bit of a smell” over SNP finances, upsetting the party’s reputation for rigid discipline. For more insights, read FT columnist Stephen Bush’s Inside Politics.As well as the Union, the Westminster government has to worry about the unions. The months of widespread industrial action have been damaging, both economically and politically. This week there is the tantalising prospect of some resolutions to the pay disputes. But brace yourself. Strikes remain on the cards by teachers, doctors, civil servants, rail workers and Amazon warehouse staff, peaking with a day of action on Budget day.I am always open to your new ideas. Thanks again for your comments about this newsletter. Email me at [email protected] or if you have received this note in your inbox, hit reply.Economic dataAside from the UK Budget, the other significant economic events this week will be the latest rate decision by the European Central Bank on Thursday and (in sympathy with the early spring weather) a torrent of US and China statistics. We will also get updates on the British and Australian employment markets while the Bank of England and Ipsos report on inflation expectations. Japan has machinery orders and trade data while India updates on its inflation rate measured by the consumer price index.CompaniesVolkswagen, the continent’s largest carmaker, reports on Tuesday, although much of this has been trailed. The company has also already dropped the bombshell that it is reordering its priorities to pursue a North American battery plant ahead of one in eastern Europe.Like its tech sector peers Deliveroo, which reports full-year figures on Thursday, is focused on cutting costs. Last week it unveiled plans for a 9 per cent reduction in its headcount, or 350 jobs. This excludes delivery riders, who are classified as contractors.The John Lewis Partnership is an employee-owned business, but its annual results on Thursday will no doubt be pored over given its status among British retailers. The department store chain, and owner of the Waitrose supermarket brand, has in recent years lost some of its lustre among retail analysts after it scrapped its partner bonus for the first time in 67 years in 2020. Changes have been made, but problems persist. There is ongoing uncertainty about the full-year bonus, and the resignation of the department store operation’s managing director Pippa Wicks last week is never a good look.Elsewhere in retail we have numbers from Inditex and H&M, the latter being a trading update rather than a results call. One question for these European market leaders is how they respond to the competition from lower-priced Chinese rivals, such as Shein and Temu.Key economic and company reportsHere is a more complete list of what to expect in terms of company reports and economic data this week.MondayIndia, February consumer price index inflation rate dataUS, S&P Global purchasing managers’ index business outlook surveyUS, January labour market statisticsResults: BuzzFeed Q4, Direct Line FY, Getty Images Q4, Phoenix Group FY, Porsche annual analyst and investor conference, Tod’s FYTuesdayEU, Economic and Financial Affairs Council (Ecofin) meeting in Brussels of all finance ministers from member statesItaly, monthly industrial production figuresUK, monthly labour market dataUK, February insolvency figuresUS, February CPI inflation rate dataResults: Costain Group H1, Close Brothers H1, Generali FY, Gresham Technologies FY, Old Mutual FY, Pennon Group trading statement, Sabre Insurance FY, TP ICAP FY, Volkswagen FYWednesdayChina, February industrial output and retail sales figuresEU, January industrial production figuresFrance, final February CPI and harmonised index of consumer prices inflation rate dataGermany, monthly industrial production figuresIndia, February trade balance dataUK, Spring BudgetUS, February producer price index inflation rate data and retail sales figuresResults: Adobe Q1, Balfour Beatty FY, BMW annual conference, E.ON FY, Foxconn Q4, H&M Q1 sales update, Inditex FY, Marshalls FY, Prudential FY, Trainline FY trading updateThursdayEU, European Central Bank interest rate announcementJapan, February trade balance figures (AM local time)UK, Q4 rail usage figuresUS, initial unemployment claimsResults: Centamin FY, Deliveroo FY, DFS Furniture H1, Dollar General Q4, Enel FY, Eni FY, FedEx Q3, Gym Group FY, Investec pre-close briefing, John Lewis Partnership FY, Polymetal International FY, Rentokil Initial FY, RTL Group FY, Savills FYFridayOECD interim economic outlook report of the near-term prospects for the global economyEU, harmonised February CPI and HICP inflation rate figuresRussia, Bank of Russia monetary policy rate-setting meetingUK, February Bank of England/Ipsos inflation attitudes surveyUS, February industrial production figuresWorld eventsFinally, here is a rundown of other events and milestones this week. MondayUK, more strikes over pay demands. Tens of thousands of junior doctors in England begin three days of industrial action, while more than 350 GMB union members at Amazon’s Coventry fulfilment centre start a week-long walk out. However, NHS workers in GMB Scotland will vote on a 6.5 per cent pay offerUK, the Scottish National Party leadership election ballot opens, with the three candidates already involved in heated exchanges. Voting ends on 27 MarchUK, a service will be held at Westminster Abbey to mark Commonwealth Day, the annual celebration of the Commonwealth of Nations.US, president Joe Biden meets with British prime minister Rishi Sunak and his Australian counterpart Anthony Albanese in California for talks on the Aukus defence pact, including whether to help Canberra build its first nuclear-powered submarinesVatican City, the Catholic Church celebrates 10 years of Pope Francis’s papacyTuesdayEU, Brussels unveils its Net Zero Industry Act as part of its wider Green Deal Industrial Plan, loosening rules on state aid and potential EU-level subsidiesUK, start of the four-day Cheltenham Festival, one of the biggest meetings in the British National Hunt horseracing calendar. The event will finish with the Cheltenham Gold Cup race on FridayWednesdayNetherlands, provincial electionsUK, a TUC-led national day of action timed to coincide with chancellor Jeremy Hunt’s Budget speech. As well as junior doctors and Amazon staff, over 70,000 members of the Universities and College Union begin three days of industrial action over pay, pensions and working conditions. Schoolteachers in the NEU union in England and Wales will begin two days of strikes and BBC local radio journalists will walk out in the morning, potentially impacting Budget day coverage. Meanwhile, 100,000 civil servants in the Public and Commercial Services union — including Border Force and DVLA staff — are striking over pay and London Underground train drivers in the Aslef and RMT unions will walk out for 24 hours in protest at modernisation plans they claim compromise Tube safetyUK, the FT’s Climate Capital Live Summit is held at London’s County Hall and online. Click here to register for a placeThursdayFrance, billionaire Kostyantyn Zhevago is due to appear at the court of appeals in Chambery following Ukraine’s request to extradite him. The businessman, who controls London-listed iron pellet producer Ferrexpo, is wanted on suspicion of embezzlement and money-launderingPoland, Czech president Petr Pavel meets his Polish counterpart in a two-day state visit to the neighbouring EU nationRussia, president Vladimir Putin is due to address the plenary session of the Russian Union of Industrialists and EntrepreneursRwanda, the 73rd Fifa Congress begins in Kigali with the footballing body’s outspoken president Gianni Infantino up for re-electionSingapore, the FT’s one-day Wealth Summit Asia at The Westin Singapore and online. Click here to book a placeUK, RMT union members working for 14 train operating companies begin further strike action in a long-running dispute over pay and changes to working patterns. RMT members at Network Rail, which manages the track, suspended their action to vote on a pay offerFridaySt Patrick’s day celebrations in numerous countries for Ireland’s patron saintBangladesh, birthday of father of the nation. Financial markets closedUkraine, ninth anniversary of Russian President Vladimir Putin signing a decree recognising the autonomous Ukrainian region of Crimea as a sovereign stateUK, Unite’s strike ballot closes for more than 3,000 security guards, engineers and firefighters employed by Heathrow AirportsUK, Liberal Democrat party’s spring conference opens in YorkUS, hearing date set for Theranos founder Elizabeth Holmes to ask a judge to pause her prison sentence of more than 11 years while she seeks an appeals court review of her conviction on charges of defrauding investorsSaturdayPortugal, thousands of workers are expected to take to Lisbon’s streets as part of a protest organised by the country’s largest workers’ union CGTP to demand higher wages amid the cost of living crisisUK, ongoing weekend strike action over rosters by barge workers in the Unite union employed by Serco at the Devonport dockyard in Plymouth, disrupting the refuelling of naval vesselsSundayFrance, remembrance day for victims of the 1954-62 Algerian warKazakhstan, parliamentary electionsMontenegro, presidential electionsUK, Mothering Sunday, also known as mother’s day More

The writer is chief executive of the Resolution FoundationThe UK has lost the habit of thinking strategically. Grappling with the constraints imposed by the global and domestic economies — or reality as it is sometimes known — is deeply out of fashion these days. Debates on how the UK might respond to Joe Biden’s Inflation Reduction Act and its near $400bn of green subsidies are the latest example. The government, and economic liberals, want to wish away such protectionism, while for green campaigners and much of corporate Britain it proves we should do exactly the same thing here. The Institute of Directors says “the UK deserves nothing less than its own version of the Inflation Reduction Act — to ensure that the UK becomes the global location of choice for all [my emphasis] forms of green investment.” These divergent responses share the same flaw: starting from instinctive and abstract reactions to Biden’s bill rather than the nitty gritty of what it means for Britain, a smaller, more open economy. Here are four more promising steps we could take. First, accept the reality. Like all lasting American industrial policies, this one is underpinned by a powerful combination of national security (competition with China) and politics, as Biden tries to wean a hydrocarbon producer off emissions and a country that recently elected Donald Trump off doing so again. European complaints about the IRA will only get so far when the EU already provides similar or bigger subsidies for clean energy. More importantly for the UK, the EU has now joined the wider subsidy race. Second, the UK needs to sort out its industrial policy with regards to net zero and focus efforts. Active government must support green growth industries before it is too late. Those opposed to the UK responding say we lack the fiscal firepower to match the US or EU. But it is home market size (ours is five times smaller than the EU and seven times smaller than the US) that should loom largest in our thinking. Increased protectionism means it will play a bigger role in deciding what gets produced where. The response should be to prioritise those green technologies where economies of scale are smaller, where energy security demands it or where we have a comparative advantage (research for the Economy 2030 Inquiry points to tidal, offshore wind and nuclear energy, and carbon capture). Third, we need to think about consumption. There will be some areas where we should be perfectly happy for US and EU taxpayers to subsidise production, not least where it is likely to mean cheaper prices or more resilient supply chains for us. Diversified solar manufacturing capacity, currently dominated by China, is no bad thing even if it’s not headed for the UK. And there are wider benefits, including knowledge spillovers from advances in green technology Fourth, the IRA should act as a wake-up call that a rebooted economic strategy for the UK needs to include, but also look beyond net zero. Accelerated decarbonisation is the central challenge our economy faces in the decades ahead and will grow industries we must be part of. But some are asking it to take more weight than it can bear in ensuring the UK continues to earn its place among the world’s richest countries. The industries involved are too small and it is wishful thinking to pretend others don’t possess big advantages in some areas: South Korea and Japan produce clean patents at around four times the rate we do. So we cannot ignore the UK’s long established advantages, from beverages to aerospace, and as a service-exporting superpower — despite the stereotypes, this includes successful musicians and architects as well as bankers. Biden’s plan is not something for the UK to ignore or simply copy. But the American approach offers a wider lesson for Britain, living through a 15-year economic stagnation: like it or loath it, this is what strategic economic thinking looks like. More

Germany has averted a threatened postal strike after Deutsche Post DHL Group agreed to double-digit pay rises, which will compensate its workers for higher living costs but add to central bankers’ fears about persistently high inflation.The two-year pay deal covering 160,000 employees was agreed in last-ditch negotiations after 86 per cent of Deutsche Post workers last week voted in favour of an indefinite strike. It is the latest sign of German unions stepping up demands for higher wages in response to inflation that soared to a 40-year high of more than 10 per cent last year. Unions are planning strikes at several German airports on Monday and across public transport later this month to reinforce their demands for double-digit pay rises. The potential for rapid wage growth to fuel further price increases, keeping inflation high through a so-called wage-price spiral, is one of the big worries of the European Central Bank, which is preparing to raise interest rates for the sixth time at its meeting on Thursday.Carsten Brzeski, an economist at Dutch bank ING, said “double-digit wage rises will fuel core inflation”, referring to the rate of growth in prices excluding energy and food, which hit a record high in the eurozone in February. “It is the big driver behind making what started off as a supply-side inflation problem into a demand-side inflation problem,” he added.ECB chief economist Philip Lane said last week that “the high levels of wage growth projected for 2023 and 2024 can be expected to make wages an increasingly dominant driver of underlying inflation in the euro area”. He added that “close inspection of the latest wage developments is a high priority”.Recent wage negotiations in the eurozone led to pay rises of 4.4 per cent for workers last year and 4.8 per cent this year, according to the ECB’s experimental tracker of negotiated wage growth. Lane said this was higher than the level consistent with a return to its 2 per cent inflation target.Under the pay deal announced by Deutsche Post at the weekend, it will give one-off payments totalling €3,000 to each employee tax-free between May of this year and March 2024, after which their monthly pay would rise by €340, which it said was an average increase of 11.5 per cent.Thomas Ogilvie, head of human resources at Deutsche Post, said the deal “went beyond our financial pain threshold”, pointing out the company had “hardly any leeway for price increases” owing to regulation.Average wages in Germany rose 3.5 per cent last year, leaving workers significantly worse off in real terms after inflation hit 9.2 per cent. The country’s central bank has forecast inflation would remain higher than 6 per cent this year.Dirk Klasen, head of communications at Deutsche Post, said he could not remember such a big pay rise since he joined the company more than 20 years ago. The deal is much more generous than the previous one agreed over a year ago to give employees a 2 per cent pay rise, but it fell short of the Verdi union’s demand for a 15 per cent increase.“This is a good result that could not have been achieved without the pressure and willingness of our members to go on strike,” said Verdi’s chief negotiator Andrea Kocsis. More

The writer is chair of Rockefeller InternationalNew York is greeting the exodus of its wealthy citizens with a shrug. The local elite seems a bit too sure that Manhattan is, and always will be, the gravitational centre of the cultural universe, or that the city is better off — as a professor recently put it to me — without all the “rich douchebags migrating to Miami”.But complacency this deep could undo even the world’s greatest city, especially now. The pandemic has shown that remote offices can work full time, making it easier for anyone to relocate and magnifying what I call the cracked mirror effect. Cracks in New York — high taxes, surging crime, simmering anti-capitalist hostility — are reflected in the flight to no taxes and a warm welcome in Miami.A similar effect is visible in Moscow, where a heavy-handed Kremlin and world reaction to the war in Ukraine are chasing rich Russians out. Instead they are opting for more hospitable options, including Dubai. Meanwhile, regulatory pressure from Beijing is driving tycoons to buy second homes in Singapore.Millionaire populations dropped by 12 per cent last year in New York, 14 per cent in Hong Kong, and 15 per cent in Moscow. Dubai, Singapore and Miami are deliberately exploiting this migration by opening their doors to capitalists. These global cities rank among the most appealing to millionaire migrants — and make up the top three among luxury property markets where prices are expected to rise fastest this year. On recent visits, I found all of them gaining momentum as people-magnets. Easy lifestyles smoothed by warm climes and efficient governments are drawing migrants from all over; they, in turn, are attracting new restaurants, swanky malls and art festivals.Singapore is the most established of the three: the millionaire population of 250,000 is much larger than those of Dubai or Miami and therefore naturally grows more slowly. Yet here, too, the energy is palpable. Recently, Singapore opened an agency to welcome family wealth management firms. The inflow was so overwhelming that the city is getting more selective about who qualifies for tax incentives. The local joke is that $500mn is the new $100mn, the sum required to get the welcome mat. Driving around I was struck by displays of wealth new to the usually sober city — one mansion had eight red Ferraris out front.Dubai now offers “golden visas” that allow the wealthy to buy property and stay. This is drawing in migrants not only from Russia but from across South Asia and the Middle East. A real estate boom is in full swing, driven by eight-figure purchases. Eighty per cent of transactions are made in cash, making the property market more stable than in past bubbles. Dubai still values Guinness World Records as much as high culture: witness the colossus of the new Atlantis the Royal, a boutique hotel but massively scaled up to nearly 800 rooms and 17 restaurants, many run by world-famous chefs. It’s easier to find a great meal there than on the Upper West Side.Miami, once a quintessentially “sunny place for shady people”, has also achieved critical mass as a richly interesting city. People move here to avoid taxes, sure, but also to meet their fellow transplants, do deals in the growing financial district, walk the white sands and shop in the new design district — the first purpose-built luxury shopping neighbourhood in America.Increasingly, unabashedly capitalist cities are finding one another. Business class on the new Miami-Dubai flight is full every day, I was told, forging a direct link between American entrepreneurs and Middle Eastern oil wealth. Many other countries want to emulate Dubai’s success, including Zimbabwe, which hopes to remake Victoria Falls as a similar hub.Manhattanites who say good riddance to the “rich douchebags” might consider the Curley Effect, named after Boston mayor James Curley. By the time his fourth term ended in 1950, Curley had deliberately driven most of the rich “Anglo-Saxons” out of his city through incendiary rhetoric and bias. The effect was to deepen its early 20th-century stagnation.New York is not Boston circa 1950, but the exodus is a bad sign. For years, the state has been bleeding migrants to Florida, where the population is now slightly larger but the state government spends half as much — and the economy grows twice as fast. In 2022, for the first time, Florida had more non-farm jobs than New York.The migration of jobs and capital are leading indicators of development and of decline. Global cities hostile to wealth will end up sabotaging their own economic prospects to the benefit of more welcoming rivals such as Miami, Dubai and Singapore. More

Will the European Central Bank signal further rate rises are coming?There is little suspense over what the European Central Bank will decide on interest rates this week — it has clearly signalled its intention to raise its deposit rate by half a percentage point to 3 per cent. So investors will focus more on what it says about future policy decisions.Some ECB-watchers think that after eurozone inflation overshot expectations in February — with core price growth excluding energy and food accelerating to a new record high — the bank will want to signal that significant rate hikes lie ahead.“For the market, the more important element is not the March hike but what the ECB signals for May and beyond,” said Mark Wall, chief economist at Deutsche Bank. “With the hawks in the driving seat, we expect another more-or-less unconditional commitment to a further 50 basis point hike in May.”However, some of the more dovish members of the ECB governing council want it to stick to its plan to decide future rate moves on a “meeting-by-meeting” basis without pre-committing, because they believe inflation will fall rapidly in the coming months.“The heat is on,” said Carsten Brzeski, head of macro research at ING, adding that because “fine-tuning of market expectations at the press conference often failed”, the ECB may instead opt for “a very defensive communication strategy” with little forward guidance.A key factor in this debate will be how rapidly the central bank expects inflation to drop towards its 2 per cent target in the new forecasts it will publish on Thursday. Most economists expect the ECB to cut its forecasts for headline inflation but to raise them for core price growth, giving something to support both sides’ arguments. Martin ArnoldHow fast is US inflation falling?US inflation has been slowing consistently since last summer. But a slower than expected decline in last month’s data fuelled expectations that the Federal Reserve would be forced to keep interest rates higher for longer, stirring up markets. The latest figures on Tuesday are expected to show that consumer prices rose at an annual pace of 6 per cent in February, down from 6.4 per cent in January, according to economists’ forecast compiled by Bloomberg. That would represent the slowest rate since September 2021 and a bigger drop than last month, and is likely to have been driven by smaller rises in prices of goods, new cars — thanks to continued improvements in supply chain dynamics — and clothing. But Credit Suisse cautioned that housing prices are likely to remain robust, saying that shelter inflation will “continue to be the main driver of overall core inflation.” “Housing activity and prices have slowed, but it will take time for this to pass through in CPI — a peak is not likely until at least the middle of the year,” analysts at the bank said.Anything less than robust evidence that inflation is slowing rapidly will probably pose challenges for the Fed, which has maintained it remains focused on reaching its 2 per cent target. Kate DuguidWill there be tax cuts in the UK Budget?On March 15 Jeremy Hunt will deliver his first full Budget statement since the September “mini-Budget” of his predecessor Kwasi Kwarteng upset Gilt markets.Investors are expecting the chancellor to strike a more responsible tone than his predecessor and avoid any big tax giveaways, such as changes to the rules that govern how much can be saved into a pension before tax charges apply. Last week, more than a dozen pension and investment companies wrote to the Treasury calling for reforms to tax rules which they say penalise over-55s returning to the workforce.“Markets will not want anything to destabilise the Treasury’s finances — taxes are up and likely to stay that way for a while,” said Koray Yesildag, director of investment management research at Aon. “In pensions, despite calls for changes to annual and lifetime allowances, we do not predict much news from Mr Hunt, because most moves to reduce complexities would reduce the government’s tax take, which is clearly not a priority right now.”However, to address stagnant UK growth, Hunt is expected to carve out new tax breaks for business — although they are likely to be on a smaller scale than the “super-deduction” scheme they would replace, which offers a 130 per cent tax relief on company equipment purchases and has cost over £25bn in two years.“Some business investment promotion will be seen as a positive, but I would say they will be temporary measures rather than permanent ones,” said Mark Preskett, senior investment consultant and portfolio manager for Morningstar Investment Management. “For us this isn’t the time to start swinging the baton.” Martha Muir More

LONDON (Reuters) -British finance minister Jeremy Hunt said on Sunday he was working with Prime Minister Rishi Sunak and Bank of England Governor Andrew Bailey to “avoid or minimise damage” resulting from the chaos engulfing the UK arm of Silicon Valley Bank.Friday’s dramatic failure of the U.S. bank SVB Financial Group, which focuses on tech startups, was the biggest in the U.S. since the 2008 financial crisis. Given the importance of the bank to some customers, its collapse could have a significant impact on British technology companies, Hunt said.”We’ve been working at pace over the weekend, through the night,” Hunt told Sky News. “We will bring forward very soon plans to make sure people are able to meet their cashflow requirements to pay their staff.”Hunt said efforts are focused on finding a “longer-term solution that minimises, or even avoids completely, losses to some of our most promising companies.” Advisory firm Rothschild & Co is exploring options for the UK arm, called Silicon Valley Bank UK Limited, as insolvency looms, two people familiar with the discussions told Reuters on Saturday. The BoE has said that it is seeking a court order to place the UK arm into an insolvency procedure.Lenders including Barclays (LON:BARC) PLC and Lloyds Banking Group (LON:LLOY) are among parties to have been approached by the board of SVB UK over the weekend to see if an emergency takeover deal can be reached, Sky News reported on Sunday.Bank of London, a clearing bank, is weighing whether an offer is possible, a person with knowledge of the discussions told Reuters.SVB Group declined a Reuters request for comment while Barclays and Lloyds Banking (NYSE:LYG) did not immediately respond.More than 250 UK tech firm executives signed a letter addressed to Hunt on Saturday calling for government intervention and warned of an “existential threat” to the UK tech sector, a copy seen by Reuters shows.Under insolvency proceedings for banks in Britain, some depositors are eligible for up to 85,000 pounds ($102,000) of compensation for cash held at lenders, or 170,000 pounds for joint accounts. Customers may not be able to recover deposits in excess of those sums, which are small relative to the deposits some startups had with the bank.Hunt reiterated comments by the BoE that overall, Silicon Valley Bank had a limited presence in Britain and did not perform functions critical to the financial system.The pledge to find emergency support was welcomed by tech firms and lobby groups, including the startup industry body Codec, calling it “an acknowledgement of the scale of the challenge”.The opposition Labour shadow chancellor Rachel Reeves urged Hunt to offer more than “warm words” to companies, saying the government had to come up with a plan by the time financial markets opened on Monday morning.British Prime Minister Rishi Sunak has said he wants to turn Britain into the “next Silicon Valley”. Britain is only behind the United States and China in terms of the level of venture capital funding for the sector, according to the government. In the U.S., the Federal Deposit Insurance Corporation (FDIC), which was appointed receiver, was trying to find another bank over the weekend that was willing to merge with Silicon Valley Bank, people familiar with the matter said on Friday, to minimise the fallout.Some financial industry executives and investors are growing increasingly concerned that the collapse of the bank could have a domino effect on other U.S. regional banks if regulators did not find a buyer over the weekend to protect uninsured deposits.($1 = 0.8314 pounds) More

BEIJING (Reuters) – Yi Gang’s surprise re-appointment as China’s central bank governor on Sunday means a pro-market mind of high international stature will continue to represent the world’s second-largest economy on the global stage.Yi, 65, was widely expected to retire as President Xi Jinping installs close allies in key roles in a sweeping government reshuffle at the start of his precedent-breaking third five-year term.A new leadership team, formed mostly of home-grown talent loyal to Xi, raises concerns among the international business community amid rising tensions between China and the West over trade, technology, the war in Ukraine and other issues.But Yi retaining his post as the governor of the People’s Bank of China provides some relief as a familiar face, albeit at the helm of a diminished institution, focused mainly on monetary policy after the launch of a new financial watchdog.The PBOC governor has high global exposure through institutions such as the Group of 20, the International Monetary Fund, the World Bank and others.”Yi’s core competitiveness lies in his professional quality and international background,” Xu Hongcai, deputy director of the economic policy commission at the state-backed China Association of Policy Science, told Reuters.”The central bank governor is not a job that can be easily taken over by someone else. We need someone like Yi who can communicate on the international stage, such as G20,” added Xu, who has previously worked at PBOC.Yi reached retirement age and was expected to be replaced after he was dropped out of the Communist Party’s Central Committee in October. Veteran Chinese banker Zhu Hexin, who heads the CITIC conglomerate, was seen as the leading candidate for the top PBOC post.Unlike Zhu, who built his entire career in China, Yi spent more than a decade in the United States, completing his doctorate at the University of Illinois and teaching at Indiana University, making him one of China’s highest-ranking “sea turtles”, as overseas returnees are called.Still, he comes from a humble background, enrolling at the elite Peking University after spending several years in the countryside during Mao Zedong’s “Cultural Revolution”.REFORM-MINDEDYi, who helped implement major currency reforms in 2005 and 2015, has long advocated interest rate and currency liberalisation. In August 2019, the PBOC replaced benchmark bank lending rates with the market-driven loan prime rate (LPR).The 2015 reform led to a wave of capital flight and currency depreciation and China has focused on sealing, rather than opening, its capital account since.Yi has repeatedly cautioned against risks from excessive credit and money growth.Still, China’s debt has risen at a faster pace than its economy in recent decades and is now almost three times as large. Under Yi, the central bank has cut the reserve ratio 14 times since early 2018, pumping more than 10 trillion yuan into the economy.While some economists argue that inflation in China is benign because the economy’s productive capacity has better access to resources, including credit, than the consumers, other economists praise Yi for keeping prices under control.Yi’s main challenge remains to keep an increasingly indebted economy growing, while its population declines and ages, the developed world is on the brink of recession, and geopolitical tensions mount.But analysts say Yi has limited room for more reforms as the Communist Party tightens its grip on the economy.”Yi has been a steady hand in managing policy and the appointment underlines the importance of policy stability,” said a policy insider who spoke on condition anonymity. “The PBOC will continue with its modest easing this year, and the possibility of rolling out big reforms is low.” More