Bank of England to expand its presence in Leeds

The Bank of England is planning to increase staffing at its northern hub.

At least 500 employees will be based in its Leeds office by 2027, equating to around one in ten of the Bank’s total workforce.

This target will be achieved through a combination of new hiring in the northern city and some voluntary relocations. Overall, the Bank will look to maintain its current headcount.

Almost 5,000 people work for the central bank, most of whom are currently based at its headquarters in the City of London’s Threadneedle Street.

“Leeds is a thriving city where the Bank of England has had a significant presence for over 200 years,” said Andrew Bailey, Governor of the Bank of England.

“Committing to a permanent, expanded Leeds office is a fantastic opportunity for us better to represent the public, build stronger links with the local business community and help promote the work of the Bank to a wider pool of talented workers.”

The announcement was welcomed by Tracy Brabin, Mayor of West Yorkshire, who said that it cemented the region’s reputation as England’s leading banking capital outside of London.

“By bringing decision-making power from London to the heart of the North, this move will benefit the entire country and help us rebalance our national economy,” Brabin added.

Interest rates go up to 5%

The Bank of England has raised interest rates by half a percentage point to 5% — the highest level in 15 years.

It’s the 13th consecutive increase as part of the central bank’s ongoing effort to tackle persistently high inflation.

The jump from 4.5% to 5% is a bigger increase than many analysts had been expecting. According to BBC News, it means that homeowners with a typical tracker mortgage will pay about £47 more each month, while those with a standard variable rate mortgage will see their monthly bill go up by around £30.

It comes after data on Wednesday showed that UK inflation remained unchanged at 8.7% in the year to May.

Members of the Monetary Policy Committee (MPC) voted by 7-2 to increase Bank Rate by 0.5 percentage points.

Announcing the decision, the Bank of England said that the full impact of the rate rise will not be felt “for some time” because many people are on fixed-rate mortgages.

UK interest rates rise to 1.75%

The Bank of England has raised interest rates from 1.25% to 1.75% — the biggest single rise since 1995 — and warned that the UK will fall into recession this year.

Interest rates are now at their highest level since December 2008.

The Bank’s Monetary Policy Committee voted by a majority of 8-1 to increase the base rate by 0.5 percentage points to help prevent the inflationary impact of soaring energy prices being compounded by price and wage pressures.

Inflation is currently at 9.4% — far above the Bank’s 2% target — and is predicted to reach just over 13% by the end of the year due to higher energy bills.

A typical dual-fuel bill is expected to increase from just under £2,000 per year to around £3,500 in October, taking household energy bills to around £300 per month on average.

The Bank also said that it expects the UK economy to contract in the final three months of this year and to continue shrinking until the end of 2023.

That would make it the longest downturn since the 2008 financial crisis.

Bank of England raises interest rates to 1%

The Bank of England has raised the base rate of interest from 0.75% to 1%, the highest level since 2009.

It’s the fourth consecutive increase since December and comes as higher fuel, energy and food prices have pushed inflation to 7%.

The Bank said it expects inflation to rise further to around 10% by the end of the year, a rate not seen since 1982 and well above the 2% target.

It also warned that the UK economy is set to shrink next year.

The Monetary Policy Committee (MPC) slashed its forecast for GDP growth in 2023 from 1.25% to -0.25%, which would leave the UK at risk of falling into recession.

As the economy slows down unemployment is expected to climb, rising to around 5.5% by the middle of 2025.

The MPC voted by a majority of 6-3 to increase interest rates by 0.25 percentage points, with three members voting for an even greater increase of 0.5 points to 1.25%.

Rates may go up again, with the Bank noting that most members of the committee “judged that some degree of further tightening in monetary policy may still be appropriate in the coming months”.

Bank of England could raise interest rates next month

The governor of the Bank of England has given his clearest hint yet that interest rates may soon rise.

Speaking at an online panel discussion on Sunday, Andrew Bailey said that the Bank “will have to act” over rising inflation.

The Bank of England has already forecast that UK inflation will exceed 4%, more than double its target, as the economy recovers from lockdowns and the price of energy soars.

Latest figures show that prices rose by an average of 3.2% over the past 12 months.

“Monetary policy cannot solve supply-side problems — but it will have to act and must do so if we see a risk, particularly to medium-term inflation and to medium-term inflation expectations,” Bailey said.

“And that’s why we at the Bank of England have signalled, and this is another such signal, that we will have to act,” he added.

In response to the comments, international banks Goldman Sachs and ING released assessments showing that the Bank of England was likely to hike interest rates in November.

The next meeting of the Bank’s rate-setting Monetary Policy Committee (MPC) will be held on 4 November.

Bank of England’s corporate finance ‘should align with climate goals’

MPs have criticised the Bank of England for providing finance to large businesses without imposing environmental conditions.

The Environmental Audit Committee (EAC) has written a letter to the Governor of the Bank of England, Andrew Bailey, urging the central bank to align its corporate bond purchasing programme with the goals of the Paris Agreement.

Failure to do so could undermine the UK’s diplomatic leadership on climate change ahead of hosting UN climate change conference COP26 in November, the committee argued.

In future the Bank should also require large companies receiving millions of pounds of taxpayer support via its Covid Corporate Financing Facility (CCFF) to publish climate-related financial disclosures, the letter said.

Such disclosures should be in line with the recommendations of the international Taskforce on Climate-related Disclosures (TCFD) and the UK Government’s own Green Finance Strategy.

“We are at a crunch point not only to mitigate the effects of climate change, but to rescue vast swathes of the economy from the impacts of successive lockdowns due to coronavirus,” commented Conservative MP and EAC chairman Philip Dunne.

“It makes sense to tackle both together, offering a ‘reset button’ to design an economy fit for net zero Britain.”

He added: “The Bank’s corporate bond purchases are currently aligned with a catastrophic 3.5 degree temperature rise by 2100 — far exceeding the Paris Agreement goal of limiting global warming to 1.5 degrees celsius.

“We are calling on the Bank to show leadership, once again on climate change, in the year the UK hosts COP26, by ensuring its actions to promote recovery also reduce the UK’s exposure to climate change risk.”

In response, the Bank stressed its commitment to reducing its impact on the climate and said it would reply to the MPs in due course.

BoE survey shows high expectations of inflation

The Bank of England (BoE) has released data showing that public expectations of inflation over the next 12 months are at their highest in five years, according to Reuters.

The proportion of the public anticipating that interest rates will rise has dropped, according to the research.

Brits surveyed in February 2019 said they expect inflation to average 3.2% over the next year, unchanged from November levels which were the highest proportion since November 2013.

The quarterly BoE survey of 4,000 people found 47% of UK citizens expect that interest rates will be raised over the next 12 months, down from 53% in November.

In February, consumer price inflation in Britain grew to 1.9% after a two-year low of 1.8% in January. The BoE forecast is that inflation will rise a little above the target 2% this year.

BoE has warned that a no-deal Brexit would impact these predictions, weakening sterling and making inflation rise sharply.

Bank of England likely to delay interest rate rise

The Bank of England has been put under pressure to delay raising interest rates, according to the Guardian.

The move comes after figures for manufacturing and consumer credit indicated weakness in the UK economy. The Bank of England had been widely expected to approve a further interest rate increase until the figures were released on Friday.

A snapshot of economic performance by the Chartered Institute of Procurement and Supply together with information company Markit indicated that the economy slowed in the first quarter of 2018 and continued to slow in the second quarter.

CIPS/Markit fell from 54.9 in March to 53.9 in April, the weakest rate of expansion in 17 months. Any figure above 50 indicates growth in manufacturing output.

Data from the Bank of England indicated a drop in consumer demand for unsecured borrowing. According to monthly money and credit statistics, lending to consumers stood at £300m in March, the smallest increase since November 2012 and well below the six-monthly average of £1.5bn.

The slowdown in consumer borrowing follows a tightening of rules by the Financial conduct Authority, which aimed to restrict the growth rate of consumer borrowing. This had been rising at 10% or more on average between 2014 and 2017. In March, the rate fell from 9.4% to 8.6%.

Economists do not expect interest rate rise until 2019

A survey of economists has revealed that UK interest rates are not expected to rise until 2019, despite inflation being above the Bank of England’s target.

A BBC survey found that the majority of economists believed the Bank of England Monetary Policy Committee (MPC) would not raise interest rates while Brexit negotiations are ongoing. Inflation is currently at 2.6%, above the official target rate of 2%.

The base interest rate has been at the record low of 0.25% since August 2016. Prior to that it stood at 0.5% since March 2009.

External MPC member Michael Saunders said in August that he thought interest rates should be raised soon to offset inflation. Saunders told a Cardiff conference: “We do not need to be putting the brakes on so much that the economy weakens sharply, but our foot no longer needs to be quite so firmly on the accelerator in my view.”

However, in the August meeting of the MPC, only Saunders and fellow member Ian McCafferty voted for an interest rate rise. The remaining six members voted to retain the current interest rate.

Saunders said that an increasingly constrained labour market, partly due to fewer EU migrant workers coming to the UK, pointed to a need for higher interest rates. In Q2 2017 the proportion of people aged 16-64 participating in the labour market reached a record high.

RBS and and Standard Chartered struggle to pass Bank of England stress test

Seven of the UK’s largest financial service providers banks have been advised to set aside extra capital as a buffer against financial shock, following the latest stress testing by Britain’s central bank, the Bank of England, it was reported on Tuesday.

This is the second year running that the bank of England has carried out stress testing of major lenders in the UK, which measure whether they would survive economic problems. During the latest tests, it was assumed that oil had fallen to $38 per barrel and that the global economy had slumped. The hypothetical scenario also assumed a dramatic slowdown in the Chinese economy, prolonged deflation, a reduction in interest rates to zero and a huge increase in costs for fines and legal bills of £40bn. The test indicated that profits would fall more than they had done during the 2008 banking crisis, but capital cushions remained strong enough to withstand the downturn while increasing credit to the economy by 10%.

Royal Bank of Scotland and Standard Chartered were found to have the least capital strength, but as each bank had taken steps to raise capital, they were not required to put new measures in place. However, all seven banks were advised that the Bank of England is phasing in a new measure known as a “countercyclical capital buffer”, which requires financial service providers to ensure that extra capital is available that will allow more room in times of economic decline to absorb losses from bad loans and other problems.

Banks are required to allocate more money to protect against lending losses in the UK, but some of this will be brought in from other reserves that the banks already have. The regulator will advise banks when to fill the buffer, setting aside reserves during stable times in the economic cycle.

Bank of England Governor Mark Carney stated at a news conference: “We will not increase capital… the overall level of capital won’t increase in the system. Large capital raisings are off the agenda and banks largely have or have access to the reserves they need”.