The Rush to Higher Interest Rates: Mortgage Holders and Other Borrowers Must Prepare for a Shock, Says ALEX BRUMMER
Markets don’t typically look to Sweden’s Riksbank for interest rate leadership, even though it has a longer heritage than the Bank of England.
A full one percentage point hike to 1.75% as Stockholm grapples with a 9% inflation rate reflects a tougher approach to monetary policy within the G20.
The Riksbank’s intervention comes amid political uncertainty as a coalition government, which includes Sweden’s far-right Democrats, is formed.
Fighting inflation: The Bank of England’s monetary policy committee may well feel the need to go bolder than the half-point hike many predicted
The new Swedish administration has a tax reduction programme. He shares this with Liz Truss, who clarifies that when it comes to UK taxation, everything is under review.
We already know that the rise in National Insurance will be boosted by next year’s rise in corporation tax.
When Truss was Chief Secretary to the Treasury under Philip Hammond, his radical instincts were suppressed by the mandarins. Now she is getting her revenge.
One of the consequences of the easing of fiscal policy is that monetary policy will have to bear more pressure. In the United States, the Federal Reserve is expected to raise its key federal funds rate by at least 0.75 percentage points today, from the current range of 2.25% to 2.5%. According to some market forecasts, US rates could hit 4.5% by early next year.
When it comes to global finance, the UK is far from an island. The Bank of England does not seek to manage the exchange rate.
But at or near its 1985 lows against the dollar, it would be surprising if it didn’t pay attention.
The monetary policy committee responsible for setting the Bank’s interest rates will – if practice so requires – be informed by the presence of the Treasury without the right to vote of the orientation of the next mini-budget.
The £140billion relief package for energy bills will have a profound effect on consumer prices, bringing them down by 4-5%.
The cancellation of the National Insurance surcharge will also ease the pressure on the cost of living.
Still, with borrowing and debt bubbling up, the Bank, so timid at the start of the new inflationary spiral, may well feel the need to go bolder than the half-point hike that many were anticipating. Five-year and two-year UK government equity yields are rising.
Mortgage and other borrowers need to be prepared for a shock.
The changing of the guard at Frasers doesn’t seem to be changing at all.
Mike Ashley will still hold a 69% stake in the company he founded as Sports Direct and will no doubt enjoy the occasional pint with his son-in-law Michael Murray who now has his hand at the helm.
Ashley’s departure will be seen by critics as a good thing. His leadership at the free start clashed with governance experts and the treatment of some colleagues at the Shirebrook warehouse in Derbyshire was disgraceful.
Yet, one can only admire his entrepreneurial spirit. He was the buyer of last resort on the High Street, buying franchises and brands from Evans Cycles to House of Fraser that might otherwise have died.
He too has never been afraid to invest in his suppliers and has held stakes in Adidas and more recently Hugo Boss on several occasions. Its no-frills retail model may have upset some sensibilities.
Turning the ground floor of the posh Lillywhites sports emporium into a set of cheap t-shirts and tracksuits was seen as sacrilege.
But in a time when so many High Street businesses have perished in the pincer movement of commercial tariffs and online rivals, it has survived. Indeed, Frasers, with its steep discounts, is well suited to an era of compressed incomes.
If he has truly disappeared over the horizon, he may be missed.
Channel 4’s ownership structure and business model has always been curious.
Technically owned by the government, its revenue comes largely from advertising and the sale of its commissioned programs to independent producers.
Unfriendly coverage of Tory politics on its news and documentary output made it an easy target for Boris Johnson’s government.
The actual selling process, led by JP Morgan, may prove to be more work than it is worth in today’s uncertain markets. It is likely that C4 would end up in the hands of ITV or an overseas commercial buyer.
That wouldn’t be the best outcome for Britain’s creative industries.