UK inflation drops to one-year low of 2.5%; oil hits three-year high - as it happened
Surprise drop in UK inflation takes pressure off the Bank of England to raise interest rates in May
- Oil hits three-year high as Saudi's target $100/barrel
- Student loan interest rate going up, thanks to RPI
- London house prices slide
- Breaking: CPI fell to 2.5% in March
- Prices are rising at lowest rate since March 2017
- The pound is falling
4.00pm BST
Time for a recap
Britain has been given some relief from the spectre of inflation, after the cost of living eased last month.
Related: UK inflation falls to 2.5%, its lowest level for a year
Related: Global debt now worse than before financial crisis, says IMF
Global debt rises to new record high $164 trillion, or 225% of world GDP, says @IMFNews.
Predictably, IMF urges govts to reduce debt levels. It expects all major economies to do so over next 5 years ... with one notable exception. pic.twitter.com/uWa0FR0FiD
Financial vulnerabilities have accumulated during years of low interest rates, and may make the road ahead bumpy and could put growth at risk, says the IMF's new Global Financial Stability Report. #GFSR https://t.co/kWjIkXzW3q pic.twitter.com/5PonokAPht
3.45pm BST
Newsflash: Oil has hit a new three-year high, as new figures show a surprise fall in US energy stocks.
Brent crude has jumped over 2% to $73.30, the highest level since November 2014. US crude oil has also risen sharply, to $68.48.
US crude tops $68 for the first time in more than three years as US crude stockpiles fall https://t.co/0TOmaOGIGe pic.twitter.com/sKSIzsCfDG
Over the past year, Saudi Arabia has emerged as OPEC's leading supporter of measures to boost prices, a change from its more moderate stance in earlier years. Iran, once a keen OPEC price hawk, now wants lower prices than Saudi Arabia.
Industry sources have linked this shift in Saudi Arabia's stance to its desire to support the valuation of state oil company Aramco ahead of the kingdom's planned sale of a minority stake in an initial public offering....
3.07pm BST
The Department for Education has got in touch about the rise in student loan interest rates to up to 6.3%.
"Our decision to raise the minimum repayment threshold for student loans to 25,000 is saving 600,000 graduates up to 360 per year from this month.
"This change in interest rate will make no impact on a borrowers' monthly repayments and very few people are likely to be affected by the increase. Once the loans are in repayment, only borrowers earning over 45K are charged the maximum rate. This ensures that they make a fair contribution to the system.
2.52pm BST
Here's some reaction to the IMF's warnings on global debt, and bitcoin:
That moment when the IMF wakes up, smells the coffee and everyone else knows the coffee is cold...? https://t.co/xhwuk8fl06
IMF: "Fiscal stimulus to support demand is no longer the priority" - quite the case of 'be careful what you wish for'... https://t.co/IZiIiUReu5
Bitcoin vs the South Sea, Mississippi and other bubbles. Basically: the biggest bubble in history. Nice chart from @IMFNews pic.twitter.com/Woc4lGpaJx
2.44pm BST
Newsflash: The IMF has issued a stark warning that country's need to tackle their debt levels, before the next crisis strikes.
From Washington, our economics editor Larry Elliott reports:
The global economy is more deeply indebted than before the financial crisis and countries need to take immediate action to improve their finances before the next downturn, the International Monetary Fund has said.
The IMF said a prolonged period of low interest rates had stimulated a build-up of debt worth 225% of world GDP in 2016, 12 points above the previous record level reached in 2009.
Related: Global debt now worse than before financial crisis, says IMF
2.32pm BST
Over in Washington, the International Monetary Fund is warning that the world's financial system faces a 'bumpy road'.
In its new Global Financial Stability Report (GFSR), the IMF says that the short-term risks have risen, thanks to rising geopolitical tensions and fears of a trade war.
Given current financial conditions, risks to financial stability and growth are high over the medium-term. This reflects the fact that recent years of low interest rates-needed to support economic growth-have provided an environment in which vulnerabilities have been building. These vulnerabilities could exacerbate the next economic downturn and could also make the road ahead bumpy.
Some of the technologies behind these assets could make financial market infrastructures, such as payment systems, more efficient. But they have also been afflicted by fraud, security breaches, and operational failures-and have been associated with illicit activities.
While the limited size of crypto assets suggests they currently pose little risk to financial stability, risks could grow if their use became more widespread without appropriate safeguards.
1.50pm BST
The fall in the pound today has helped to push shares in London to a six-week high.
The FTSE 100 has gained 63 points to 7289, its highest level since the end of February.
Exiting the office soon but WOW .. BMO says market is pricing in possibility that nickel will be incorporated into any fresh sanctions on Russia #metals #commodities #nickel #aluminum @business pic.twitter.com/Mcz15JTQUw
12.34pm BST
Today's inflation report is bad news for Britain's students - and anyone paying off a student loan.
That inconvenient RPI rise ...@educationgovuk about to confirm student loan rate rising to 6.3 pct from sept - yikes
Will govt really let tuition fee interest rate go up to 6.3% in autumn on basis of today's RPI? After all the huffing and puffing over the fee review presumably will want to intervene rather than let loan rates climb even higher?
Government should not link these interest rates (or anything else) to the RPI - a measure of inflation which is overstated, which has had national statistics status withdrawn, and which is so flawed that the National Statistician has advised it should not be used. https://t.co/cLJ7HSzbfA
11.38am BST
Danielle Haralambous, UK Analyst at the Economist Intelligence Unit, also suspects the Bank of England will hike borrowing costs next month:
"Inflation was softer than expected, but the decline in the headline rate won't be a complete surprise to the Bank of England's policy-setting committee, which expects annual inflation to ease this year as the impact of the pound's past depreciation fades. But the committee is also looking at other data showing domestic price pressure still in the pipeline, notably a pick-up in wage growth and firm input prices. We expect these factors to keep inflation well above the bank's target for much of this year and support the case for a gradual normalisation of UK monetary policy.
In our view, there is still a high chance that the bank raises interest rates again next month."
Soft UK inflation data will sow seeds of doubt over a May Bank of England rate hike. But growth-inflation trade-off still favours *gradual* policy normalisation (textbook monpol). Will take some steam out of $GBP rally as it lowers the bar for two 2018 hikes (too early to tell) pic.twitter.com/LK31uxja4d
11.18am BST
The pound is continuing to slide, as traders ponder what this morning's drop in inflation means for UK interest rates.
Sterling has now fallen by a whole cent against the US dollar, to $1.419. It's also down 0.7% against the euro, to a1.147.
Despite the drop in inflation, I still suspect MPC members might hike.
After all they have done it in the past: From my database, MPC members voted in July 2007 for a hike (to 5.75%) despite CPI inflation 'dropping like a stone' by recording three (!) successive falls from 3.1% in March 2007 to 2.8% in April, to 2.5% in May and to 2.4% in June 2007!
Though the impact of a weakened pound appears to be dropping out of the inflation numbers, three other factors are likely to exert an offsetting upward pressure on the pace of price increases. Productivity growth remains sluggish, with GDP rising not much above the rate of employment growth. Wage increases are also picking up - and could easily reach 3%per annum in the second half of this year.
In addition, a buoyant global economy is likely to continue to push up food and energy prices, with the oil price now already above $70/barrel.
Looking at reactions to today's CPI, fair to say most economists think the BoE will press on with a May rate hike, despite weaker-than-expected inflation and so-so wage growth.
But among some of them, certainly a pang of... pic.twitter.com/RBJfN4D1SH
10.36am BST
There's no inflation in London's property market right now.
Instead, house prices in the capital have fallen by 1% year-on-year -- the first annual decline since 2009 (when Britain was in recession).
ONS/Land Registry average house inflation in the year to February 2018 by region. House prices in each region rose except London, where house prices fell by 1.0% in the year to February. #ukhousing #housinghttps://t.co/zclM7taRF4 pic.twitter.com/IG0mY7Djie
This is the lowest annual growth in London since September 2009, when it was negative 3.2%. London has shown a general slowdown in its annual growth rate since mid-2016. The second-lowest annual growth was in Yorkshire and The Humber, where prices increased by 3.1% in the year to February 2018.
10.27am BST
Inflation across the eurozone has risen, but by less than expected.
Figures just released by Eurostat show that prices in the euro area rose by 1.3% per year last month.
Euro-area inflation accelerated less than initially estimated last month https://t.co/OYaQaI8ddg pic.twitter.com/WWA6eXO2MB
#Eurozone #CPI increased to 1.3% from 1.4% in March. #Core inflation unchanged. Good news from service component bringing 0.67pt to inflation after 0.58pt prior month. Disappoing #industrial goods with a negative contribution from 0.16 to 0.05pt as euro appreciation continues.
10.22am BST
Frances O'Grady, general secretary of the TUC, is urging the Bank of England not to raise borrowing costs next month:
"Wages are still worth less than before the financial crisis, leaving many working people struggling to get by. A hike in interest rates is the last thing they need, and the fall in inflation shows the Bank of England should hold off.
10.20am BST
Tej Parikh, Senior Economist at the Institute of Directors, says the drop in inflation could spur growth in the UK economy:
"Today's figures show a significant drop in inflation, and it is expected to continue to fall over the course of this year. This will be welcomed by the business community who have seen high inflation act as a major speed bump on economic growth ever since the beginning of last year.
The drop in inflation will also offer much-needed breathing space for households who have been wedged between weak wage growth and rising price levels, which in turn will hopefully bolster consumer confidence and sales activity.
10.18am BST
The drop in Britain's inflation rate is welcome news for UK households. Many have suffered a cost of living squeeze, as wages failed to keep pace with the cost of living for the last year.
Philip Smeaton, chief investment officer at wealth manager Sanlam UK, points out that the jump in inflation last year forced many people deeper into debt:
"With inflation falling back towards the Bank of England's 2% target and wage growth overtaking inflation for the first time in over a year, it finally looks like the squeeze on living is easing. These positive signs of a strengthening economy could be all the Bank of England needs to pull the interest rate lever in May - moving policy back towards monetary normalisation. However, the MPC should consider what impact this could have on consumer debt. Since the shock vote to leave the EU, consumers have continued to spend despite immense pressure on their pockets - meaning they have likely accumulated debt. Should too much pressure be applied through higher interest rates this could impact consumers ability to spend, which is a vital element of the UK economy."
"While households can breathe a sigh of relief thanks to another easing of inflationary pressures, family disposable income remains squeezed, particularly after the news that disposable income has fallen for the first time in six years. Even with the inevitable rate rise, it's clear that more needs to be done to help make what little savings people can afford to put away, go that bit further.
10.00am BST
This is the first time since summer 2015 that Britain's inflation rate has fallen for two months running.
The inflationary impact of the pound's slump, after the EU referendum, seems to be fading.
"CPI is at its lowest in a year and March's decline is the 2nd consecutive month of weaker price rises - we haven't seen that since August - September 2015.
The majority of the slip is courtesy of the continual pricing out of the devaluation of sterling post the EU referendum, lower clothing prices as well as idiosyncratic changes courtesy of the rescheduling of the Budget until Autumn."
9.56am BST
9.55am BST
The absence of new 'sin taxes' on booze and cigarettes this spring helped to keep inflation down (because the government has moved the annual Budget statement to the autumn).
Mike Hardie, head of inflation at the Office for National Statistics, says:
"Inflation fell to its lowest rate in a year, with women's clothing prices rising slower than usual for this time of year.
"Alcohol and tobacco also helped ease inflation pressures, with tobacco duty rises linked to the Budget not appearing this March, thanks to its new autumn billing.
9.45am BST
Suren Thiru, head of economics at the British Chambers of Commerce, says the drop in inflation undermines the case for raising UK interest rates next month:
With #UK CPI inflation dropping to 2.5% in March, the Bank of England's case for raising interest rates looks limited at best. pic.twitter.com/pj17Cys1UJ
March CPI inflation at 2.5% some way below forecast of 2.8%. (memo: Feb was 2.7% against forecast of 2.9%). @bankofengland should hold off interest rate rises. pic.twitter.com/hjaHTKqcZZ
9.43am BST
The pound is sliding, as the City of London reacts to March's unexpectedly weak inflation figures.
Sterling has dropped by three quarters of a cent against the US dollar to $1.42.
9.31am BST
NEWSFLASH: Britain's inflation rate has fallen to 2.5%, a one-year low.
That's down from 2.7% in February, and another sign that the cost of living crisis is easing, given that wages are currently rising at 2.8%.
9.28am BST
The Unite union are demanding answers from De La Rue, following its decision not to appeal over the UK passport contract.
Here's Tony Burke, Unite's assistant general secretary.
UK passports: De La Rue must now explain their reasons and their decision not to appeal against gvt awarding contract to Gemalto to their loyal and & skilled (and now devastated) workforce in Gateshead.
9.17am BST
After a strong run, European car sales have suffered their biggest fall in five years.
New car registrations across the EU fell by 5.2% in March, new figures show, driven by drops in the UK, Germany and Italy.
"Momentum is starting to slow in some markets and especially in the United Kingdom."
Auto sales dropped in March at eight of the 10 top-selling carmaking groups, with the steepest declines at Ford Motor Co., Fiat Chrysler Automobiles NV, BMW AG and Nissan Motor Co.
8.54am BST
A planned merger to create Britain's biggest property company has been abandoned, in the face of UK retail gloom.
The Board of Hammerson reassessed the proposed acquisition of Intu in light of updated information on current market dynamics in the UK. Over the last five months, the financial strength of retailers and other tenants in the UK has softened and a number of retailers have entered into administrations or CVAs, while consumer confidence has also remained subdued.
With retail profit warnings at seven year highs shouldn't be a surprise that these big retail property deals being questioned. Why double up on retail property when stores are closing and rental income under threat. $HMSO
8.30am BST
There are red faces at banknote printer De La Rue this morning, as it counts the cost of the 'Brexit blue passport' farrago.
The company, which also makes the new polymer bank notes, warned that underlying operating profit was now expected to be in low to mid 60m range for the year to 31 March. It followed a profits warning less than month ago, when De La Rue predicted profits of between 71m and 73m.
The firm said the lower profits expectation reflected "the write off of the [about] 4m bid costs related to the UK passport tender and delays in the shipment of certain contracts in the last week of the period".
Related: De La Rue drops passport appeal and issues profit warning
8.05am BST
Today's UK inflation report could send traders racing to buy, or sell, the British pound.
Inflation in Britain is one of the key data investors and traders are following as it relates to how fast and aggressively the Bank of England will hike rates. We know that the BoE want to raise their key interest rate levels during their next two meetings but the actual timing of the move is still under debate.
The pound's price action largely depends on when market participants believe the British central bank will pull the trigger and the pace of inflation is key in gauging when this will be.
7.49am BST
Good morning, and welcome to our rolling coverage of the global economy, the financial markets, the eurozone and business.
Data released today shows that UK real wages grew (0.1%) for the first time in a year as nominal wage growth (2.8%) was just enough to surpass inflation pic.twitter.com/WHb0lshI48
Wednesday's FINANCIAL TIMES: "Investors push sterling higher with bets on rate rise next month" #bbcpapers #tomorrowspaperstoday pic.twitter.com/S7DmN0yShr
The recently announced price increases by British Gas, of 5.5% for both gas and electricity, don't take effect until the end of May so won't have any impact on the forthcoming release, however, in the second half of 2018, factoring in this utility bill hike will add an estimated 0.05-0.1ppts to annual CPI rates.
It remains to be seen whether other energy providers follow British Gas, but in any case it reaffirms expectations that inflation will remain above the 2% target into 2019.
Today's inflation data from the eurozone could show signs of a pickup having been lacklustre for the past year. Whilst CPI is forecast to be 1.4% on an annualised basis, on a monthly basis an uptick to 1% from 0.2% is forecast.
Continue reading...