Bank of England's Mark Carney says inflation hasn't peaked yet after hitting 3% today - as it happened
- Dow tops 23,000 for the first time
- Mark Carney says inflation hasn't peaked yet
- Carney: EU banks aren't ready for hard Brexit
- Inflation has hit 3.0%, a five-year high
- Weak pound since Brexit vote is pushing prices up
- Rising inflation eats into workers' wages
- State pension likely to rise by 3%
5.30pm BST
A down day for equities, with European markets mostly finishing lower. After edging towards another closing high, the FTSE 100 finally ended in the red despite a dip in the pound. Sterling suffered on continuing Brexit fears and following dovish comments from members of the Bank of England's monetary policy committee. Elsewhere the main markets took a breather although Spain bucked the trend, with the Ibex recovering from its recent weakness in the wake of the row over Catalan independence. The final scores showed:
4.41pm BST
The Dow above 23,000 was short-lived, for the moment at least. It is still up, but just 0.08% at 22,976.
Dow 23,000, we hardly knew ye. #sarcasm
4.19pm BST
Commenting on the day's rising stock markets, Joshua Mahony, market analyst at IG, said:
Global stocks have enjoyed another day of gains, with the now customary record highs in US indices this time driven by an outperformance in the banking sector. The dollar strengthened, with European currencies losing ground amid uncertainty fueled by Catalonia and Brexit. With the yen and gold losing ground, there is a clear shift into risk assets to the detriment of perceived havens.
The latest US earnings season is underway, and US financials are heading higher in the wake of impressive figures from Goldman Sachs and Morgan Stanley. ..the impressive overall profitability in US banking does help instill confidence in an environment of rising rates.
4.16pm BST
The Dow Jones Industrial Average has crossed 23,000 for the first time, as the surge in stock markets continues. The move comes not long after it breached the 22,000 barrier on 2 August.
And I just got my shipment of Dow 22k hats, too...
3.52pm BST
The comments from the Bank of England outweighed strong inflation figures as far as the pound is concerned, says Connor Campbell, financial analyst at Spreadex:
Rate hike uncertainty spoiled what could have been an incredibly hawkish day for the pound, given that inflation hit a 5 year high of 3.0% in September.
The Bank of England ended up distracting sterling from that alarmingly high CPI reading. New deputy governor Dave Ramsden was pretty dovish this morning, and while his MPC peer Silvana Tenreyro was slightly more open to a rate hike, she said any move is 'very contingent on the data' (which, at the moment, isn't a great sign for sterling).
3.39pm BST
Here's a chart from ING Bank showing UK inflation excluding the movements in the pound and oil price:
Important #UK chart - stripping out the impact of 's fall and oil price effect, #inflation would be below 2%. Few signs of domestic price pressures based on this measure.... $GBP pic.twitter.com/kJL0du1AKL
3.28pm BST
Back with the pound:
drops on failure of Carney to commit to hike (said might be appropriate in coming months). It will plummet if BoE holds steady in November https://t.co/DzfDhLolnb
2.51pm BST
The outlook for US manufacturing looks upbeat even if the recent hurricanes have a negative effect on the short term figures, reckons James Knightley, chief international economist at ING Bank. Following the industrial production figures, he said:
US Industrial production rose 0.3% month on month, in line with expectations. A two-tenths upward revision to August was also announced (-0.7% versus -0.9% originally reported).
The details show that manufacturing output rose 0.1% month on month, utilities grew 1.5% month on month while mining was up 0.4% month on month. The Federal Reserve had suggested in advance of the report's publication that the data would be liable to revision given a lack of information on which operations were back up and running after Hurricane Harvey while Hurricane Irma will have had a depressing effect on figures from Florida.
2.47pm BST
Over in the US, industrial production for September has edged up in line with forecasts.
It rose 0.3% compared to a decline of 0.7% in August, itself revised up from an initial 0.9% fall.
#UnitedStates Industrial Production month-on-month at 0.3% https://t.co/d2vCgluAuV pic.twitter.com/hMBHGW6Noq
2.38pm BST
The pound is down around 0.5%, partly on the downbeat Brexit comments from the OECD and Bank of England governor Mark Carney. It has also been affected by Carney saying interest rates would rise in the months ahead, which was taken to mean not necessarily in November as expected, as well as dovish remarks from other members of the Bank's monetary policy committee.
The fall in sterling has given a lift to the FTSE 100, which has a large number of exporters who benefit from a weaker pound. The leading index is currently up 20 points or 0.28%.
2.28pm BST
Time for a quick recap.
Britain's inflation rate has hit a new five-year high, taking another bite out of wages and bringing more pain for those relying on government benefits.
Here's what contributed to the rise in CPI inflation: transport, food and recreation/culture costs pic.twitter.com/nwXGjEajAN
#BOE's Carney makes financial case for a strong #Brexit transition deal https://t.co/P8uszQeYMo via @JohnEGlover pic.twitter.com/VW4WDtUWbP
This has been a tricky year for the central bank, especially when considering how elevated inflation levels have squeezed household spending - impacting the outlook for the economy. With inflation leaving average earnings in the dust, consumers are feeling the pinch and as such, it threatens the sustainability of Britain's consumer-driven growth.
While the argument for higher rates is to put a lid on inflation, this may end up punishing the fragile UK economy.
"The Brexit squeeze caused by the falling pound is getting worse, and it is hitting the poorest families hardest.
"This above-target inflation is increasing the cost of the weekly shop and cutting into people's living standards.
1.58pm BST
Here's a clip of Mark Carney today, warning that inflation will probably rise further in October or November:
"Inflation will peak" in next couple of months - Bank of England Governor Mark Carney tells @CommonsTreasury https://t.co/8I5mA6Udpu pic.twitter.com/GzZ8C6xciv
1.29pm BST
And finally, governor Carney is asked about the Bank of England's gender pay gap.
If you start from a position of being almost exclusively a white male institution, you need to have a deliberate strategy of movement.
Carney is over after a question on gender pay gap. The median gap is 24% and the mean is 21%. No gap on equal pay for equal work terms.
1.15pm BST
Back in the Thatcher Room, Mark Carney is invited to dwell on the benefits of Brexit....
The governor cited a few, including:
1.05pm BST
Carney denies that the Bank's quantitative easing programme, which has bought 425bn of bonds with newly created money, is the monetary equivalent of heroin.
Carney asked if @nickmacpherson2 is right and QE is like heroin
Answer: We're clean. Not addicted and not about to go through withdrawal
12.59pm BST
Breaking away from Mark Carney (and inflation), the Treasury has slapped down the OECD after it suggested that Britain could stay in the European Union.
The Paris-based think tank argued this morning that Britain's economy would get a boost if it chose not to follow through with Brexit.
'We are working to achieve the best deal with the EU that protects jobs and the economy. We aim to agree a Free Trade Agreement that is comprehensive and ambitious. Our 23 billion National Productivity Investment Fund which will improve our country's infrastructure, increase research and development and build more houses.
We are leaving the EU and there will not be a second referendum.'
Amazing moment when, after introducing the OECD to outline their bleak Brexit forecast, Hammond legs it before press can ask any questions pic.twitter.com/i6CMVwMnmI
12.52pm BST
Q: Should fiscal policy be taking more of the strain to help the UK economy?
Unsurprisingly, Mark Carney won't be lured into commenting on tax and spending policies. We take fiscal policy as given, he insists, it's not for us to advise the government.
12.33pm BST
The pound has dropped by half a cent against the US dollar since Mark Carney's testimony began.
Sterling may be suffering from the governor's warnings about a no-deal Brexit
The pound is falling while Mark Carney is talking https://t.co/8fp0TNvHFN pic.twitter.com/MUNzvV0Trl
12.32pm BST
Q: Does the Bank of England have a clue about why UK productivity is so weak?
Carney says he does have a clue yes...and after more prodding from the committee he cites weak business investment and the wider impact of economic uncertainty.
John Mann extra deadpan at the Treasury Committee today. Here he is asking if Carney "has a clue" about why productivity is so low pic.twitter.com/Ig0CSFx5E7
12.26pm BST
Q: The UK's debt burden is growing, thanks to consumer credit products such as PCPs used to buy new cars. When will the bubble blow up?
Carney argues that auto finance is not as serious as some claim.
12.23pm BST
Q: When must a transition deal be agreed, before firms take matters into their own hands and trigger their contingency plans?
Carney won't commit to a fixed date, but says the issue is particularly urgent for the City.
Transition deal needed by Q1 for financial sector, Carney says, for other sectors 'there is a bit of a lag'. So urgency greatest at banks
12.19pm BST
Q: How have businesses and consumers' attitude to Brexit changed?
Mark Carney indicates that UK firms have become "less confident about a smooth transition" and less confident about the end state of Brexit.
At present, household expectations are broadly consistent with a smooth outcome to a future arrangement.
12.10pm BST
Q: What preparations are you making for Brexit?
Carney says the Bank of England has looked at worse-case scenarios, and what we can do to mitigate those risks.
.@catmckinnell asking about the basis of @bankofengland forecasting. Mark Carney: we have looked at worst case scenarios as well as the best pic.twitter.com/AZtaeduLEA
12.06pm BST
The Treasury committee are probing Mark Carney about how the trillions worth of derivatives contracts between the UK and other EU country members will be handled after Brexit.
Mark Carney says this cannot be resolved if Britain crashes out without a deal.
There's more data that is relevant to the EU in the UK than vice versa...
These issues are bigger for Europe than they are for us, but they're material for us.
11.59am BST
Bang on cue, Mark Carney argues that a 'no-deal' Brexit poses a threat to Europe's financial stability.
He tells the Treasury committee that Europe would be 'short of financial services capacity' in the short term, if Britain leaves the EU without a deal.
11.55am BST
Breaking: Britain faces long-term decline unless it secures "the closest possible economic relationship" with the European Union after Brexit.
That's according to the Organisation for Economic Cooperation & Development (OECD), in its annual healthcheck on the UK economy.
Related: Keep close to the EU after Brexit or face long-term decline, OECD warns UK
11.50am BST
Carney argues that Britain and the EU will agree a transition deal, as avoiding a hard Brexit will be in everyone's interests.
Carney says Uk needs a transition and Eu will agree. "There will ultimately be a transition... a transition agrmt is in everyone's interest"
There's no unilateral (i.e. no deal) solution to fixing 40,000 derivatives contracts that will be undeliverable after Brexit, says Carney
MArk Carney: BoE done preparations for "hard exit without any transition period" but much less in EU and its firms - on derivatives
11.47am BST
Carney is asked about concerns that some banks aren't ready for Britain's departure from the EU in 2019.
He replies that European-based institutions have done much less preparation than UK banks for the possibility of a hard exit from the EU without any transition deal.
So we're doing all those preparations for that. There has been much less of that done in the European Union, including by the member firms.
11.44am BST
Q: What would happen if the City of London's euro clearing market moved abroad after Brexit?
Carney warns that Europe's real economy would suffer higher costs if the euro clearing market was fragmented
11.37am BST
Carney also points out that the Bank of England is already trying to stimulate the economy:
BOE's Carney: UK monetary policy is stimulative, fiscal policy is restrictive and UK faces a variety of headwinds. $GBP $Brexit.
11.36am BST
11.34am BST
Q: With interest rates at just 0.25%, the UK doesn't have much room to cut if there is a recession. Wouldn't it be wise to raise borrowing costs to give the Bank more ammunition when needed?
Carney isn't at all convinced that this is a good idea. He explains to the committee that the Bank's job is to keep inflation at 2% in the medium term. Raising rates today so you can cut them tomorrow wouldn't really fit with that remit.
Building a war chest in interest rate terms for a potential future shock, isn't staying on point in terms of the inflation target, nor is it appropriate or necessary given that policy can move quite nimbly if required.
11.31am BST
Q: Are you concerned that the UK's net international investment position has been revised down by 490bn (as reported by the Daily Telegraph yesterday)?
Carney says that the stock of UK assets, as opposed to the flows, is quite healthy.
The UK owes a lot in sterling, and owns a lot in foreign currency assets.
With the depreciation [of the pound] you get a positive move.
11.24am BST
Mark Carney, governor of the Bank of England, is testifying to the Treasury Committee now.
It's being streamed live, here.
We expected sterling to fall sharply. It did. That passes through to prices....
The sole reason that inflation has gone up as much as it has is the depreciation of sterling.
11.22am BST
Guardian Business has launched a daily email.
Besides the key news headlines that you'd expect, there's an at-a-glance agenda of the day's main events, insightful opinion pieces and a quality feature to sink your teeth into each day.
Related: Business Today: sign up for a morning shot of financial news
11.18am BST
Here's our economics editor, Larry Elliott, on today's inflation report:
Britain's pensioners will receive a 3% increase in their state income next year after the annual inflation rate reached its highest level since early 2012 last month.
The 12-month increase in the cost of living as measured by the consumer prices index (CPI) edged up from 2.9% to 3% - in line with recent Bank of England forecasts.
Related: State pension to rise after UK inflation increases to 3%
11.16am BST
Back in parliament, new Bank of England policymaker Silvana Tenreyro has been quizzed by the Treasury committee.
Tenreyro told MPs that she could vote for an interest rate rise in the coming months, but only if the data justified it.
[Studies show that] if it turns out to be a mistake it will require a lot more cuts in the future in order to recover that lost ground"
"My position now is that if the data outturns are consistent with the picture i've just described, of an output gap going towards zero, then i would be minded to vote for a bank rate increase in the coming months. However that's very contingent, and i should be clear, on the data outturns. If the data undershoots and the data are not in line with those expectations then i will wait until i see further evidence of that output gap being eroded."
"We are still far from that point at which we will start unwinding given that the bank rate is so low."
Silvana Tenreyro on why she brings something unique to the MPC
"I grew up in a developing country, subject to many crises".
Not reassuring
11.09am BST
Labour MP Angela Rayner tweets:
UK inflation climbs to highest level since April 2012 on the same day as the TUC&trade unions lobby parliament for fair pay in public sector
11.08am BST
The well-respected Institute for Fiscal Studies makes in important point.
The rise in inflation means the government's policy of freezing benefits is causing more pain than anticipated.
When govt announced benefits freeze, expected 4.8% real cut in benefits. Now rising #inflation means 6.7% cut. https://t.co/zFG4q1QQO5 pic.twitter.com/6iIzvpbRnF
Whatever you want to achieve benefits freeze is bad policy. Inflation has turned out higher than expected so poor hit harder than intended https://t.co/dkxe55w0U4
10.56am BST
In other news, UK house price inflation has picked up -- but not in London.
Average house prices in the UK rose by 5.0% in the year to August 2017, up from 4.5% in July 2017.
The uncertainty over Brexit may be felt more keenly in London than other areas due to the importance of international businesses.
Figures from the City of London borough bear this out where prices are down 18.4% compared to a year ago.
The North/ South divide:
House prices in the City of London borough down 18.4%
North West up 6.5%
10.44am BST
Amit Kara of the NIESR thinktank warns that UK inflation could keep rising in the next few months:
Our Head of UK Macroeconomic Forecasting reacts to CPI figure out today #inflation #BoE #interestrates pic.twitter.com/Q1vuJ2WbOf
10.37am BST
Newsflash: The Bank of England's newest deputy governor has revealed that he isn't one of the policymakers who believe interest rates need to rise soon.
Sir Dave Ramsden has told the Treasury Committee that he wasn't among the majority at last month's meeting who said that they were close to voting for a hike.
The majority of MPC members saw a case for removing some of the monetary stimulus in the coming months. I wasn't in that majority.
This was my first ever MPC member as a voter. I wasn't in a position where I was part of that majority that thought - the way the degree of slack was diminishing, the way trade off between slack and higher inflation was disappearing - was sufficient to give that signal.
*RAMSDEN WASN'T IN MPC MAJORITY SEEING HIKE IN COMING MONTHS
Dave the Dove
10.34am BST
Scotiabank also blame the weak pound for driving inflation up:
Scotiabank inflation analysis; "The acceleration in the CPI has been almost entirely due to the weakness of the GBP exchange rate."
10.30am BST
It's clear that the slump in the pound after last year's EU referendum is the main factor driving UK inflation up.
These charts show how the cost of goods has spiked over the last year. Britain is a net importer of actual stuff, so a weaker pound means it's simply more expensive to bring raw materials and finished products into the country.
UK #CPI @ 3.0% YoY still being predominantly driven by imported goods prices. Core inflation, producer prices, wages & (less tradeable) services prices flat-lining. Tough call for #BOE beyond November #MPC pic.twitter.com/JEmWoMg74P
Inflation has increased to 3% -the highest of any major EU economy. It's time for Gov to put Single Market back on negotiating table. Pls RT pic.twitter.com/372g3UaTRU
While there are signs of a slowing economy, with sterling still at risk as Brexit negotiations remain inconclusive the British economy remains vulnerable to further inflationary forces.
10.22am BST
UNISON, the public sector union, argues that the government needs to produce a 'decent pay rise' to make up for years of austerity.
General secretary Dave Prentis says:
"There's no light at the end of the tunnel for public service workers. Unfunded, below-inflation pay awards are apparently the best the government has to offer.
"All public servants have seen the value of their pay fall year on year. They need a decent pay rise that more than matches the rising cost of living."
10.18am BST
The Treasury has responded to today's inflation figures, arguing that the government is helping where it can...
"We understand that families are feeling the effects of inflation and we are helping them with their living costs. We've frozen fuel duty, doubled free childcare for nearly 400,000 working parents and cut income tax for 30 million people.
Increases to the National Living Wage are also delivering the fastest pay rise for the lowest paid in 20 years.".
10.15am BST
The Resolution Foundation points out that UK welfare benefits are NOT rising in line with inflation (unlike pensions...).
This means that the poorest in our communities will find it even harder to get by next year, even if they are in work.
Rising inflation means low-income working families with two kids will lose 315 from the benefit freeze next April pic.twitter.com/0pKCNebT5a
10.10am BST
Hannah Maundrell, editor in chief of money.co.uk, warns that rising inflation will eat into our Christmas budgets:
"We're now starting to feel the real impact of Brexit on our wallets. With inflation at a five-year high there's no escaping the fact that the luxury of low inflation is well and truly over with prices of goods and services rising left right and centre and the shiny new pounds in our pockets will unfortunately buy you less.
"Your household budget will be stretched as the cost of transport is creeping up and the price of fuel and food is also on the up. The cost of your supermarket shop is rising too so you must act now to protect yourself from future struggles.
10.08am BST
3% rise in Sep inflation will mean pensions rising next yr faster than wages (or benefits), widening gap in intergenerational fortunes
10.07am BST
Britain's pensioners are the big winners from today's inflation report, thanks to the triple-lock that guarantees that their pensions won't lag behind prices.
So argues Maike Currie, investment director for personal investing at Fidelity International.
"Life is getting much more expensive with an increase in the cost of food, fuel and a last-minute price spike in flights all contributing to the rise in inflation. Meanwhile, our pay packets have stagnated with wage growth falling behind inflation, despite UK unemployment being at a record low.
"It's also worth noting that September's inflation figure matters hugely to both retirees and savers. Under the government's 'triple lock' guarantee, the state pension will rise in April each year by whichever number is the highest out of the September CPI inflation number, average earnings or 2.5%. With inflation running higher than either wages or 2.5%, this will be determine the rise in the State Pension next year, arguably making retirees the biggest winners from today's inflation figure.
10.00am BST
The Federation of Small Businesses is aghast that its members face a 3.9% increase in business rates next year, thanks to today's RPI inflation report (details here)
Mike Cherry, the FSB's national chairman, says UK firms have suffered enough, following the controversial revaluation process that send some bills spiralling higher.
Today's RPI figure follows six months of business rates misery for our small business community.
Since April's bruising revaluation we've had the staircase tax, introduction of an unworkable appeals platform and chronic delays to the Chancellor's 435 million relief package. A near four per cent bill increase next April, on top of losing year one transitional caps, will be the last straw for many.
9.55am BST
The TUC, which represents millions of British workers, says the government needs to respond to the ongoing wage squeeze that is hurting UK households.
TUC General Secretary Frances O'Grady said:
"The government needs to face up to Britain's cost of living crisis. The squeeze on household budgets is getting tighter by the month.
"The Chancellor must use November's Budget to ease the pressure on hard-pressed families.
"Raising interest rates now would be a big mistake. The UK economy is simply not strong enough.
"We need to get wages rising before we start think about hiking rates."
9.52am BST
This is one of the most depressing charts in UK economics today -- showing how UK workers' pay packets are shrinking in real terms.
With UK inflation hitting a 5-year high of 3%, real wages continue to be squeezed. Nothing to suggest this is going to change any time soon. pic.twitter.com/gY9sL35gfV
9.51am BST
The retail prices index, another measure of inflation, rose by 3.9% in September.
That means that UK firms face a 3.9% rise in their business rates next year, under the current system. It could also drive up costs for motorists.
RPI at 3.9% also suggests a fuel duty hike of nearly 3p per litre in April 2018 unless the Chancellor acts
9.42am BST
9.37am BST
This chart shows how UK inflation has risen sharply, to its highest level since April 2012
9.30am BST
Breaking! Britain's inflation rate has hit a new five and a half-year high.
The consumer prices index jumped by 3.0% in September, up from August's 2.9%. That's the highest reading since early 2012.
9.26am BST
A reminder of why today's inflation reading is particularly important:
Sept inflation data (out in 8mins) is the last month we'll get before the BOE interest rate decision on Nov 2. Unemployment tomorrow.
9.12am BST
Analysts at HSBC reckon the UK's inflation rate jumped to 3.1% last month:
HSBC on UK CPI: We look for 3.1% YY, supported by electricity & petrol prices, Ryanair cancellations and FX passthrough effects
9.07am BST
Yikes! Shares in entertainment group Merlin have slumped by 20% in early trading.
Merlin has shocked the City by warning it suffered "difficult trading conditions" over the summer.
The spate of terror attacks witnessed in the UK marked an inflection point in Midway London and UK theme park trading.
Poor weather in Northern Europe and extreme weather in Italy and Florida also impacted peak season trading.
Shares in Madame Tussauds owner Merlin Entertainments down 18% after warning that terror attacks hit attractions ... pic.twitter.com/kjaaN1dE1U
9.03am BST
Economist Rupert Seggins has tweeted some handy graphs on UK inflation, ahead of this morning's data in 30 minutes time.
1. UK inflation figures for September out today - consensus is for 3%y/y rise in average prices (CPI). pic.twitter.com/Rp5np9GHoO
2.Sterling's still not done with core prices. Means a higher starting point for any further food/energy price rises to hit overall inflation pic.twitter.com/0meIxSaOXp
5. Changes in the oil price suggest that UK transport price inflation likely ticked up a bit in September. pic.twitter.com/kvNLH7YE4Z
8.59am BST
Sterling is inching higher this morning, as City traders anticipate UK inflation hitting its highest levels since 2012.
Despite last night's meeting between Theresa May and Jean Claude Juncker (and David Davis and Michel Barnier) producing nothing more than vague promise to 'accelerate' negotiations, the pound is on the rise this Tuesday.
That's because investors are eagerly awaiting September's inflation reading, which is set to see the consumer price index finally hit a 5 year high of 3.0%. Such a reading would put even more pressure on the Bank of England to raise rates, though that hawkish urge may be tempered by the continued fall in real wages (set to be confirmed tomorrow) and a sharp month-on-month drop in retail sales (coming on Thursday).
8.44am BST
Two years ago, CPI inflation was actually negative, at -0.1%.
That was partly to falling oil prices, which delivered cheaper petrol, and price wars between UK supermarkets.
8.39am BST
Higher petrol prices and utility bills probably drove UK inflation up in September.
Airline ticket prices could also push the consumer prices index up to 3%. That's partly Ryanair's fault; customers scrambled to buy new flights after it cancelled thousands of trips last month.
8.07am BST
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
Britain's inflation rate could hit a new five-year high this morning, hitting people in the pocket and putting more pressure on the Bank of England to raise interest rates in November.
We expect that CPI inflation (09.30 BST) rose from 2.9% in August to 3% in September, intensifying the real wage squeeze. That said, we suspect inflation is now not far from its eventual peak.
We think that it will rise to about 3.2% before year-end.
UK Inflation set to rise above 3% this year and fall back to the @bankofengland 2% target by end of 2018 #EYITEM https://t.co/tPEpZluLOm pic.twitter.com/RqxGmj5SMX
UK CPI inflation likely to be 3pc or above in today's release for the first time since Spring 2012. Another good reason for Nov rate rise.
Related: UK inflation set to hit five-year high, raising heat on interest rates
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