Bank sets a higher route
Everyone struggles a bit with the Bank of england’s pronouncements on interest rates because of frequent zig-zags. But there wouldn’t be much point in meeting eight times a year if minds were not to be changed by the latest data.
The combination in the last week of higher-than- expected inflation data, up 2.9pc, and stronger-than-predicted employment has given two dissidents calling for an interest rate rise extra firepower.
What economists Michael Saunders and Ian McCafferty now need to do is persuade the inner circle who work for the Bank that it is time to reverse direction. Judging from the minutes of the rate-setting Monetary Policy Committee that time could be upon us, with the Bank raising expectations of an early tightening, perhaps in november.
It is worth reflecting on how the country came to have a bank rate of just 0.25pc. The cost of borrowing dates back to the chaotic days after the Brexit vote in June 2016 when the governor Mark Carney stepped into a political vacuum with a 0.25 of a percentage point rate cut, extra Qe and support for bank lending in the money markets.
Standing at 0.5pc, ahead of the referendum, rates were already at record lows and have held there since April 2009 as a result of the financial crisis which shattered bank customers, investors and employees with the run on northern rock a decade ago.
If anyone had any doubts about the hubristic and amateurish stewardship of the rock with its 125pc mortgages, subprime referrals to Lehman and casino banking model they should heed Financial Conduct Authority chief executive Andrew Bailey’s recollection of events.
Bailey tells of chaotic late-night sessions on Threadneedle Street where the Bank’s senior lawyer had to read the riot act to the rock’s representatives and order them, if necessary, to wake up sleeping directors.
Clearly, the financial markets are increasingly convinced that a rate rise is on the way with the pound up 2.4pc against the currencies of the UK’s major trading partners in recent days hitting a two-year high. That may be too late for tourists stung by the parity euro or worse in the summer.
But even a tiny rise of a quarter-point would be a shaft of light for all those savers and pensioners still suffering the pain of what happened at the rock and, a year later, at Lehman, royal Bank of Scotland and HBoS.
Unhappy days.
America first
THE United States is taking a sensibly robust attitude to overseas efforts to take control of its intellectual property.
Treasury Secretary Steven Mnuchin has blocked the acquisition of silicon chip developer Lattice by a Chinese-backed buyout firm Canyon Bridge Capital Partners.
He cites national security reasons for opposing the deal because Lattice chips have been used in the US space programme. The decision, approved by President Trump on the recommendation of the Committee on Foreign Investment in United States, has important ramifications for Britain.
Canyon is thought to have been lining up an offer for Imagination Technologies (which I hold), a British software developer brought low because of a contract dispute with Apple which allegedly has ransacked its technology. The insouciance of the May Government about overseas takeovers is putting Britain’s cutting edge financial technology industry at risk.
Two of the nation’s most developed payments firms, Worldpay and Paysafe, are on the block along with Cambridge-based Aveva, home to sensitive nuclear software.
A Government willing to adopt a hostile approach to rupert Murdoch over the 21st Century Fox bid for Sky also has a duty to make sure UK intellectual property is not allowed to leak overseas.
Fast track
MUCH bonhomie at UK Finance’s inauguration dinner at the Mansion House where spreadsheet Phil Hammond promised a ‘bespoke’ Brexit deal for the City.
Bankers present all seemed bright and cheery, with royal Bank of Scotland chief executive ross Mcewan only too happy to let it be known he is not off to Australia and is determined to see through the job at the recovering lender where the taxpayer still owns 70.8pc.
Lloyds Bank’s aloof chief executive Antonio Horta-osorio took a different approach, having rid the Black Horse of the taxpayer.
He avoided banter with the media and trotted past without a glance.
Funny that.