Prepare for higher rates: Bank of England’s latest hints of more aggressive growth, says Alex Brummer
A major advantage of an independent central bank is that it can make decisions independently of political tides.
The latest intervention from two of the Bank of England’s top rate setters signals a more aggressive hike in further borrowing costs.
Chief economist Hu Pill stressed that the bank was “in the price stability business”.
Rate hikes: The Bank of England’s recent intervention on two key interest rates shows signs of a more aggressive rise in borrowing costs going forward
This suggests that the monetary policy committee’s focus on the pandemic and recent concerns about a recession may no longer be the guiding light.
Financial stability chief John Cunliffe, who succeeded Mario Draghi when he ran the European Central Bank, says the old lady will do “whatever it takes” to fight inflation.
Outlining the difference between the US and the UK, Pill notes that Americans are energy independent and can therefore act more decisively.
As sterling continues to slide against the forex market, more decisive action by the bank – a half-penny hike in August – could halt further falls and ease imported inflationary pressures.
Bloomberg reports that the pound has been decidedly weak this year, down 12 percent against the dollar and “swinging wildly” in the wake of the Tory party turmoil.
Given the scale of the political unrest with dozens of ministerial resignations, the currency is really deteriorating relative to the historic sterling crisis.
It’s worth seeing a broader picture.
The euro has fallen to its lowest level against the dollar since 2002. The normally solid Swiss franc is at a seven-year low.
And the US dollar index, as measured by a basket of currencies, is at a 20-year high.
The pound’s fall is being attributed to the slowing UK economy (still worse than the eurozone) and Boris Johnson’s final stance raises questions about the credibility of some reports.
The numbers speak a different truth.
Hopes of a post-pandemic surge in capital raising on the London Stock Exchange have been dashed by the market turmoil.
Rising interest and a boom in the tech bubble have eroded confidence.
New data from EY shows that 26 initial public offerings (IPOs) raised just £595m in the first half of this year, compared with £9.4bn in the same period in 2021 against 47 floats.
The city’s biggest hope in the coming days is the long-awaited split and IPO of GlaxoSmithKline’s healthcare arm – Helion. Big bets are on the line.
Who among the investment banks and legal advisers raking in £500m in fees and transaction costs would not want to see it fail.
For GSK, this is the moment to assert itself as a pharma and vaccine champion.
He will no longer have the comfort of knowing that his Sensodyne, Panadol and Centrum brands will be there to collect the bill.
It’s trying to give itself a chance by bringing debt of £10billion or more onto Halon’s balance sheet. It’s going to be a nervous time for Chief Executive Emma Walsley.
There was frenzy of activity before isolation, including announcing support for its new £400million science park in Stevenage and more and significant advances on its adult respiratory vaccine. The risk for Walmsley is a flop for Haleon Float.
The £50bn benchmark was set in January 2022 when GSK confirmed it had received an offer from Alan Jopp at Unilever.
With an estimated valuation of £33bn by Credit Suisse, the chances of reaching that figure in the current market are considered zero.
What activist investor Elliot will make of it is unknown. Since his intervention, the stock price has recovered and Elliott has cooled his rhetoric. A price cut could weaken Wolseley’s position.
But he can’t be blamed for the uncertain markets that have hampered IPOs on both sides of the Atlantic.
Make the wafer safe
Trade Secretary Quasi Quarteng has given himself two months to decide whether to halt the sale of Newport Wafer Fab, Britain’s largest and most sensitive semiconductor maker, to Dutch company Nexperia, controlled by China’s Wingtech.
The National Security and Investment Act empowers the government to freeze deals against the public interest.
Quarteng does not want to interfere in free markets. But there may be some obvious cases for intervention.
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