IMF cuts global forecasts; oil jumps on deal report – as it happened

Graeme Wearden (until 12.30) and Nick Fletcher

from on 2016-04-12 16:58 (#1A6E1)

5.58pm BST

A jump in the oil price has fuelled a rise in European markets, which had previously been looking rather uncertain.

Hopes of an agreement at the imminent meeting of oil producers in Doha, specifically suggestions that Russia and Saudi Arabia had agreed a freeze, sent crude prices to new highs for the year. Brent is currently 3.7% higher at $44.43 a barrel, having touched $44.73, while West Texas Intermediate - the US benchmark - is up 3.1% at $41.61. Oil has also been lifted by the weakness in the dollar, as investors bet there would not be an imminent rise in US interest rates.

5.52pm BST

The IMF's growth forecasts still look too optimistic even though they have been downgraded, says Capital Economics:

Despite being revised down yet again, we think the IMF's latest projections for global growth are still too high. This is partly because the IMF appears to be constrained by the official, government forecasts for China and India, but its projections for the US and the euro-zone also look too optimistic.

Among advanced economies, the key differences [between the IMF and our forecasts] are that we are less optimistic about both the US and the euro-zone. With first-quarter growth in the US now likely to be only around 1.0%, the risks to our US forecast are to the downside. And for the euro-zone, the generally disappointing first-quarter data have supported our view that activity is likely to slow this year.

Among emerging economies, we think growth in China will be around 5.5%. Note that although this is lower than official and IMF estimates, it would be an improvement compared to last year. For India, too, the difference between our projections and those of the IMF is partly due to uncertainty surrounding the official national accounts data. Finally, although Brazil and Russia's recessions both look set to continue this year, we expect them to be slightly less severe than is projected by the IMF.

4.53pm BST

#Greece FinMin Tsakalotos sees an agreement with the Institutions either by April 22 #Eurogroup meeting, or a few days after that.

(A reminder that there were hopes of an agreement over the weekend.)

4.33pm BST

More on the Greek situation:

Income #tax and #pension bills to be voted by end of April, will include #troika's remarks- FinMin

Greek Social Security Minister says Greece and its creditors almost agreed on pension reforms: BBG (one of the notable sticking points)

#Greece Labour Min says that only 10% of pensioners will see a cut in their suppl pension. #economy #ec #imf

4.21pm BST

Oil prices were always going to be influenced by reports ahead of the producers' meeting, said Joshua Mahony, market analyst at IG, but in practice, any output freeze at January levels may not bring the benefits expected. He said:

Rumours of a deal between Russia and Saudi Arabia for a production freeze provided further gains for crude today amid a four-month high for Brent. This week was always likely to see market positioning in advance of the meeting, which has driven substantial gains across the energy sector. However, given that many of the world producers are pumping less than they did in January, a freeze could even increase the amount of crude being produced.

4.16pm BST

Greek finance minister Euclid Tsakalotos has said that two bills on pensions and taxes - sticking points in the discussions with the country's creditors - will be presented to parliament next week, Reuters in reporting.

And - something to look forward to - he has also suggested there may be an extra Eurogroup meeting on 25 or 26 April.

Possible #Eurogroup on Apr 25-26 for final decision on #Greece review, Greek FinMIn says.

4.08pm BST

The oil price increase is giving some support to stock markets, with the FTSE 100, Germany's Dax and France's Cac all climbing around 0.5% and the Dow Jones Industrial Average up 110 points or 0.6%. The positive moves come despite the gloomy noises coming from the International Monetary Fund which has cut its global growth forecasts again.

3.39pm BST

Oil continues to strengthen, now helped by another report that key producers might agree a deal to tackle the supply glut, this time from news agency Interfax:

Saudi Arabia and Russia said to agree output freeze, #WTI ticking up on the news $CL_F RO pic.twitter.com/C7M5CS0K3c

[BREAKING] Saudi Arabia and Russia reach consensus on oil output freeze - IFX via BBG $CL_F

Saudi Arabia and Russia deal will not depend on Iran - IFX via Rtrs

Russian Energy Ministry makes no comments on Interfax reports of output freeze deal - Rtrs

3.21pm BST

Here's Reuters on the IMF's latest comments on Greece:

The International Monetary Fund's chief economist said on Tuesday that Europe will need to show some flexibility towards Greece as it deals with a refugee crisis and negotiates a new bailout package.

"There's certainly going to be a need for more flexibility to tackle the refugee crisis and some support from the broader European community," IMF chief economist Maurice Obstfeld said in a news conference. "It's a European problem, it's actually a global problem."

3.12pm BST

Here's a list of the recent Brexit polls:

Updated #Brexit polls table
Any am I missing, padawan? pic.twitter.com/XsZR3llq6b

3.03pm BST

After its earlier strength on the back of higher than expected UK inflation figures, sterling has now fallen back as a new survey shows the campaign for Britain to leave the EU is in the lead.

The pound is down almost half a cent to $1.431 as an ICM poll put leave on 45% and remain on 42%.

2.59pm BST

The European Commission has now unveiled its tax proposals for large corporations. Jennifer Rankin writes:

Multinational companies will be forced to disclose profits earned and taxes paid in Europe and the world's shadiest fiscal havens, under proposals announced on Tuesday by EU regulators.

The European commission wants all large companies to publish a country-by-country breakdown of profits, taxes, employees and turnover in all 28 member states of the EU, as well as some of the most problematic tax havens.

2.56pm BST

The US should wait until inflation is stronger before raising rates, according to Philadelphia Federal Reserve president Patrick Harker.

And negative interest rates, although legally and technically difficult, should not be taken off the table, he said, echoing comments earlier this year from Fed chair Janet Yellen. Harker told a local business group:

Although I remain confident that inflation will return to the Committee's 2 percent target, my outlook sees it doing so only gradually... global headwinds point to some downside risks to my economic outlook.

These considerations make me a bit more conservative in my approach to policy, at least in the very near term. Although I cannot give you a definitive path for how policy will evolve, it might prove prudent to wait until the inflation data are stronger before we undertake a second rate hike. So, I am approaching near-term policy more cautiously than I did a few months ago. That is part of being data dependent.

Fed's Harker: Wouldn't take negative rates off the table, but there are legal and technical issues to implementation: Rtrs

2.44pm BST

The IMF's economic counsellor Maurice Obstfeld has said there is a need for more flexibility between Europe and Greece to handle the refugee crisis and the debt situation.

#IMF's Obstfeld: Need for flexibility to be shown to #Greece due to the refugee crisis. #WEO

2.32pm BST

Bruce Springsteen, Paypal and now Deutsche Bank.

The bank has added its name to the list of those protesting a controversial anti-LGBT law in North Carolina. It has frozen plans to create 250 new jobs at its Cary, North Carolina, operation after the state became the first in the US to enact legislation requiring people to use public bathrooms or locker rooms that match the gender on their birth certificate rather than their gender identity.

2.03pm BST

The IMF is worried about a new phase of the financial crisis, but its proposals to remedy the situation do not go far enough, writes Larry Elliott:

The prospect of Brexit clearly scares the IMF. A vote to leave would, it says, have serious consequences not just for Britain and its EU partners but for the whole of the global economy. The Fund is twitchy. It can identify a number of different triggers that might possibly bring about a new, dangerous phase of the crisis - such as a sharper than expected slowdown in China, a collapse in emerging markets or a pandemic. But with little more than two months to go before the referendum, Brexit is the most immediate threat.

But if the Fund is right in its assessment, something will trigger the crisis sooner or later even if Britain decides to remain a member of the EU. The IMF says global growth has been too slow for too long, and proposes a mix of expansionary monetary policy (low interest rates and quantitative easing), higher spending on infrastructure and research and development, and structural reforms to boost productivity.

2.00pm BST

Ahead of its spring meeting the International Monetary Fund has, as expected, cut its forecasts for global growth, at the same time as warning on the risks of Britain leaving the European Union. Katie Allen and Anushka Asthana write:

A British vote to leave the EU risks causing severe economic and political damage to Europe that will spill over into an already febrile world economy, the International Monetary Fund has warned.

Cutting its forecasts for global growth and for the UK and other advanced economies, the IMF listed a potential Brexit vote in June's EU referendum as a key risk in its latest World Economic Outlook (WEO)...

1.50pm BST

US import prices rose in March by 0.2% after a revised 0.4% drop in the previous month.

The increase came following a rise in the cost of petroleum products, but it was less than the 1% expected by analysts.

1.44pm BST

Brent crude has climbed above $43 a barrel on hopes that next week's meeting of oil producers can agree to freeze output to tackle the current supply glut.

Iraqi oil official Falah Alamri said he was confident that the meeting with Opec and other producers in Doha would reach an agreement.

12.52pm BST

The gap between UK inflation and average earnings is narrowing:

Positive gap between #UK #inflation (0.5% in Mar) & annual #earnings growth (2.1% in 3 months to Jan) narrowed to 1.6% from 3.1% last Sep

12.48pm BST

MPs are about to start an emergency debate on the crisis in the UK steel industry. My colleague Andrew Sparrow will be following proceedings in the politics live blog:

12.45pm BST

The dollar has fallen to an eight month low against a basket of currencies as investors continue to bet that the Federal Reserve is in no hurry to raise US interest rates.

Meanwhile sterling has climbed to its highest level in more than a week after the higher than expected UK inflation figures. The pound is up around half a percent at $1.4313 after the data, which suggested that UK rates could rise more quickly than people had been expecting.

12.30pm BST

Greece's inability to wrap up negotiations with creditors last night has fuelled fears that the talks could drag on until the early summer, potentially coinciding with Britain's referendum on EU membership.

"because there are many other small [issues] we did not have the time to discuss it became obvious to all of us that it was not possible to have a staff level agreement by day break today."

"First of all from the far right that will exploit anti-immigrant sentiment while the trade off of less reforms for more refugees will, quite rightly, never be accepted by the IMF."

#Greece's 2016 debt obligations pic.twitter.com/uqXMoeoCr4

11.58am BST

Newsflash: Saudi Arabia's credit rating has just been cut by one notch, to AA-, by Fitch.

Fitch also left Saudi Arabia with a negative outlook, meaning further cuts are possible.

BREAKING: Saudi Arabia ratings cut by Fitch, which says outlook remains negative https://t.co/wx9kCQwAFW pic.twitter.com/hdRW81pEih

11.53am BST

Has peace broken out at the European Central Bank, between president Mario Draghi and his more hawkish colleague Jens Weidmann?

"It's not unusual for politicians to have opinions on monetary policy, but we are independent,"

"The ECB has to deliver on its price stability mandate and thus an expansionary monetary policy stance is appropriate at this juncture regardless of different views about specific measures."

#ECB's Weidmann sounding less hawkish than usual here. From @FT interview with @senoj_erialc https://t.co/YjZ8oRGrmT pic.twitter.com/u6sKcNUnYb

11.31am BST

British house continue to outpace both the headline inflation rate and average earnings.

New figures show that UK house prices increased by 7.6% in the year to February 2016.

As average UK house prices rise 7.6%y/y, Scotland remains the only part of the UK where prices are falling. pic.twitter.com/7YLaoaEZxu

11.25am BST

Here's our news story about the rise in UK inflation in March:

11.21am BST

The recent weakness in the pound, which has fallen 6% since last October, has also pushed inflation higher (by driving up the cost of imports).

Dimitris Hiotis, partner at pricing experts Simon-Kucher & Partner, reckons this trend could continue ahead of June's EU referendum.

With the judgement day on Brexit looming, the sterling has continued to depreciate in recent months, which has increased the cost of imports to the country.

As we move closer to the referendum on June 23^rd, and with the latest polls showing it to be a close run race, we expect sterling to depreciate further and therefore cause additional inflationary pressures in the coming months.

"The slight rise in inflation is likely connected to depreciation of the pound as uncertainty surrounding the EU referendum increases and international investors begin to sell off sterling. This is not a one-month phenomenon - core inflation, which strips out volatile factors like energy and food, increased to 1.5% in March, after averaging 1.1% over the last 8 months.

"While the Bank of England has been keen to see prices rising as a spur to economic growth, if pay rises do not shadow increased inflation, real wages will decline, putting pressure on people's wallets and holding back increases in productivity. Real wage increases are now under 2% (1.9%), running just ahead of core inflation.

11.02am BST

This rise in inflation doesn't mean that the UK economy is healed, argues TUC General Secretary Frances O'Grady:

"Despite a small rise, the overall picture is still of very low inflation. It indicates that the economy is still not at full strength, with too much underemployment and too little wage growth.

"With the global economy slowing down, the government cannot just sit by. We need investment in skills, infrastructure and public services to promote growth for the long term."

10.57am BST

Mike Cherry, National Chairman at the Federation of Small Businesses (FSB), has urged the Bank of England to resist any temptation to raise interest rates at this week's meeting.

He reckons his members have enough on their collective plates:

"Small firms are currently dealing with a raft of challenges, including the National Living Wage which came into effect this month, driving up costs and driving down modest profit.

A recent FSB survey showed small business confidence hovering at its lowest level since 2013. Despite inflation edging up last month, our members welcome this ongoing period of low inflation which has helped to keep other operating costs manageable.

10.55am BST

Economists are split over when the Bank of England might take the plunge and raise interest rates, now that inflation is creeping towards its 2% target.

Ian Stewart, chief economist at Deloitte, reckons the BoE is "miles away from raising rates", given the state of the UK economy.

The Bank's big problem is sustaining growth and getting inflation up.

"Inflation may have bottomed, but the mounting risks in the global economy, and the continued risk of deflation, means that interest rates are likely to stay on hold until next year."

Looking ahead, we expect the headline rate to increase to 1.6% by the final quarter of the year. Beyond the modest dent to GDP growth in the first half of this year as a result of the financial market rout and Brexit uncertainty, underlying fundamentals point to robust growth at around trend (0.5% qoq) in the second half of the year driven by strong consumer spending and recovering business investment.

The on-going acceleration in inflation, alongside consumer credit growth at a decade high, household saving at a historic low and the labour market at full employment begs the question if near-zero rates are still appropriate.

10.44am BST

Confused about how inflation is calculated? Or wondering why some economists have been fretting about deflation?

Our video explainer has the answers...

10.17am BST

You can see the inflation report here, on the Office for National Statistics website.

10.11am BST

Today's rise in inflation may undermine the notion that UK interest rates could stay on hold until 2020.

Samuel Tombs at Pantheon Macroeconomics certainly thinks so, saying:

Inflation pressures are continuing to build, challenging the consensus view in the markets that the MPC will leave interest rates on hold until the end of the decade. The rise in the headline rate entirely reflected an increase in core inflation to 1.5%, from 1.2% in February. About half this increase came from airfares, the rest from stronger inflation in the clothing and restaurant sectors.

Airfares were reportedly boosted by Easter in late March, but we have our doubts that all of their rise is temporary.

10.04am BST

Ben Brettell, senior economist at financial services group Hargreaves Lansdown, also believes the Bank of England will sit tight at this week's monetary policy meeting.

Naturally policymakers will need to remain mindful of the risk that inflation overshoots at some point. However, the UK economy is battling a number of significant headwinds at present. Consumer spending, aided by low inflation, low unemployment and rising wages, has been the engine of economic growth lately. But recent surveys suggest consumers reined in their spending in March - perhaps the first sign of nerves ahead of June's EU referendum.

All in all, the economic picture remains highly uncertain and I expect no action from Threadneedle Street for some time yet.

9.56am BST

Britain's inflation rate is still far too low to prompt an interest rate rise, says Maike Currie, investment director for personal investing at Fidelity International:

Today's increase is unlikely to spur the Bank of England into considering raising interest rates on Thursday with widespread consensus that this week will see the 85^th consecutive month that the bank keeps interest rates on hold at their emergency level of 0.50%.

9.54am BST

Bloomberg columnist Mark Gilbert is struck by the surge in air fares last month.

@business @lucy_meakin Surge pricing not just for UBER, it seemeth: pic.twitter.com/PPr9PGhljm

9.50am BST

Here's some details from today's UK inflation report:

prices, overall, rose by 1.7% between February and March this year compared with a rise of 0.7% between the same 2 months a year ago. By far the largest upward effect came from air transport where the timing of Easter contributed to fares rising by 22.9% between February and March 2016. Fares rose by 2.7% between the same 2 months in 2015.

There was also a smaller upward effect from rail passenger transport with fares rising this year but falling a year ago. These upward effects were partially offset by a downward contribution from motor fuels with petrol prices rising by 0.9 pence per litre this year compared with a larger rise of 3.8 pence per litre a year ago.

prices, overall, rose by 1.0% between February and March this year compared with a fall of 0.1% between the same 2 months a year ago. Last year was the first time that prices had fallen between February and March since the CPI started in 1996. Normally they rise as they continue to recover following the January sales period. The upward contribution this year came from price movements across a range of women's outerwear.

prices, overall, rose by 0.5% between February and March 2016 compared with a rise of 0.2% between the same 2 months a year ago. The upward effect came principally from restaurant and cafi(C) prices rising by more than a year ago.

9.46am BST

After falling into negative territory last year, Britain's inflation rate has now moved towards the Bank of England's 2% target:

9.42am BST

The pound has jumped by over half a cent against the US dollar, to around $1.43.

Traders are calculating that higher-than-expected inflation figures could mean UK interest rates rise earlier than expected.

9.40am BST

Britain's core inflation rate, which strips out energy, food, alcohol and tobacco, has hit 1.5%.

That's the highest rate since October 2014, indicating that inflationary pressures are building.

9.36am BST

The early Easter holiday has helped to push inflation up.

Holiday air fares rose in March compared to 2015 (when Easter was later).

9.33am BST

This is the highest UK inflation rate since December 2014, as measured by the Consumer Prices Index anyway.

9.31am BST

Breaking: Britain's annual inflation rate has jumped to 0.5% for March, up from 0.3% in February.

That beats forecasts of a smaller rise, to 0.4%.

9.29am BST

The IMF has already cut its forecasts for growth this year several times, as RBS's economist team point out.

Today's World Economic Outlook, due at 2pm BST, may include further gloom.

New IMF forecast figs today. Pessimism over 2016 global growth has steadily grown. Will there be another shaving? pic.twitter.com/S7inT589TY

9.12am BST

Hopes that Greece and its creditors could make a breakthrough have been dashed overnight, probably to no-one's great surprise.

Talks between the two sides were adjourned early this morning, and will resume next week once the IMF's Spring Meeting has concluded.

"The Greek government and the four institutions agreed there was progress,"

First "deadline" missed, onwards to the next one. Stop me if you've heard this one before #Greece https://t.co/Ltj2PlCE54

8.53am BST

Tax avoidance by multinational corporations will be forced into the open under proposals to be unveiled by European regulators later today following the Panama Papers revelations.

The European commission will put forward legislation requiring large multinationals operating in Europe to disclose where they make profits and where they pay tax on a country by country basis.

8.30am BST

Shares in luxury goods makers are sliding across Europe this morning, following disappointing results from France's LVMH Moit Hennessy Louis Vuitton SE.

"The U.S. market is strong and Europe remains well oriented except for France which is affected by a fall in tourism."

8.21am BST

Troubled UK supermarket chain Tesco has cut back one of its overseas ventures, as it looks to bolster its position back home.

8.14am BST

London's stock market has opened cautiously, with the FTSE 100 index dropping by 8 points in early trading.

Mining shares are up, partly helped by the weaker dollar.

8.06am BST

Jack Lew, the US treasury secretary, has turned the tables on the International Monetary Fund by arguing that it must do more to help the global economy recover.

...intensify scrutiny of critical issues like exchange rates, current account imbalances, and shortfalls in global aggregate demand

7.52am BST

IMF chief Christine Lagarde has poured cold water on hopes that a global tax authority could be introduced, to combat tax evasion.

Speaking in Washington overnight, she warned that the idea of an intergovernmental UN tax body - promoted by Oxfam - faced major obstacles from governments.

"We need to be aware of the massive hurdles and obstacles along the way because taxation for the last century or so has been defined, conceptualised, designed, implemented on a purely territorial sovereign basis.

And if anything, levying taxation is considered as an attribute of sovereignty, and anything that takes away from that is going to be very strongly opposed by many countries in the world, many forces."

"I think it's an area where we all have to think outside the box because there are too many boxes in that tax field and thinking outside the box might be of great interest."

7.37am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

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