UK inflation rises to 0.1%; Spanish MPs back Greek bailout - as it happened

Graeme Wearden (until 1.45) and Nick Fletcher

from Economics | The Guardian on 2015-08-18 17:21 (#HPV4)

The cost of living picked up in July, despite another drop in British food prices and transport costs

Latest: Spain votes on Greek deal
U K inflation turns positive - coverage start here
Pound jumps as core inflation spikes
Jeremy Cook: Rates may rise in February 2016

Earlier:

6.20pm BST

Despite talk of confidence votes and elections, the Greek government appears to have put off any decision regarding political developments until next week. Our correspondent Helena Smith reports:

After an unusually intense August, the Greek government now appears determined not to act rashly. With European parliaments signing off on the bailout accord and the first aid disbursements looming, prime minister Alexis Tsipras has signaled that any political decision will be put on hold until next week when he has a more thorough overview of the economic situation.

"In the next ten days decisions must be taken so that a road map is on the table," the government spokeswoman Olga Gerovasili told the municipal radio station Athina 9,84 earlier today.

6.18pm BST

Another slump in the Chinese stock market - down 6% on the day - renewed concerns about the outlook for the world's second largest economy and pushed commodity prices - metals and oil - lower once more. So despite signs of progress on the Greek bailout, with a number of parliaments voting to back the agreement, investors were in cautious mood once more. By the close of play most markets had fallen back:

6.06pm BST

The European Central Bank has lowered the emergency liquidity assistance cap for Greek banks to a89.7bn, reports Reuters.

This is said to be in line with a Greek central bank request.

#ECB lowering #Greek ELA, but that is to be expected given the bailout agreement and that this is what the Greek's already asked for...

5.36pm BST

Here's Reuters take on the vote in the Spanish parliament to approve the third Greek bailout deal:

Spanish lawmakers voted in favour of a third bailout package for Greece on Tuesday, with the centre-right government voicing misgivings about Greece's commitment to reforms but using its majority in parliament to approve the rescue.

"There are serious risks, such as execution risks, given the Greekpolitical situation," Economy Minister Luis de Guindos told parliament in a special session on the deal Greece reached with its creditors, seen as helping it stay in the euro zone.

In a dig at anti-austerity parties such as Podemos that have gained traction in Spain in the past year, De Guindos took aim at the type of "populist siren songs" which he said had pushed Greece to the edge, under the helm of the leftist Syriza party.

Spain faces a general election around November. The country is due to contribute some a10.1bn of the a86bn package for Greece.

5.13pm BST

Estonia also backed the Greek deal earlier:

#Estonian parliament @riigikogu approved new bailout for #Greece: 50 for, 37 against, 6 abstaining.

6 governing coalition MPs rebelled - 1 voted no, 5 abstained. #Estonia #Greece #bailout #vote #Parliament

Parliament approved at an extraordinary session of the European Commission and the Memorandum of Understanding concluded between the Greek draft, Estonia agrees to the Greek political agreement on the program of the third financial endorsement.

Resolution of the Riigikogu "The European Commission and the Hellenic Republic entered into a Memorandum of Understanding between the draft approve" (69 OE), by 50 and by 37 members of the Riigikogu.

5.02pm BST

The Dutch parliament, which is due to discuss the third Greek bailout on Wednesday amid some reported disharmony among its coalition (), has conveniently published all the documents related to the deal on its website.

4.37pm BST

The voting in the Spanish parliament was reportedly as follows:

297 in favour

4.28pm BST

And after the debate, the Spanish parliament has also given its backing to the Greek deal.

4.24pm BST

In Spain, parliament is beginning to vote.

4.15pm BST

Meanwhile:

[BREAKING] Austrian FinMin Schelling: Parl't Subcommittee Approves Greek Aid - BBG $EURUSD

3.54pm BST

In China, the central bank has injected $48bn of new capital in China Development Bank, which provides medium and long term financing for major national projects, according to the Xinhua agency.

The move comes amid growing concerns about the outlook for the world's second largest economy, which prompted a 6% fall on the country's stock market earlier today.

3.11pm BST

While we wait for news of the Spanish vote on the Greek bailout:

#Bundestag to vote on #Greek bailout at 12.05 CET tomorrow. Approval likely, but any extra conditions would increase risk deal won't last.

2.48pm BST

In the US, Wall Street has opened lower in the wake of the 6% slump in Chinese shares, as well as disappointing quarterly figures from Wal-Mart.

The Dow Jones Industrial Average is down around 40 points or 0.2%.

#Housing starts +0.2% to 1.2 mil in Jul. Permits -16.3% to 1.12 mil as NY tax break expires. Housing gradual rebound. pic.twitter.com/zlXkDpMWHu

Even at a seven-plus-year high, housing starts still well below bubble-era levels http://t.co/4bbFguDesF pic.twitter.com/zKhqs1ctSL

2.22pm BST

Back with the voting on the Greek bailout:

BBG Reporting That Slovenia Is Said To Endorse Greek Aid Package

2.06pm BST

Meanwhile Greece is still in talks with Germany's Fraport about a a1.2bn deal to operate 14 regional airports, says Reuters, despite earlier reports a deal had been done.

A preliminary agreement was reached last year, and a report in the government gazette today was initially taken to mean the deal was done. But a government official said the announcement was just confirming a commitment to proceed with the plan under the previous terms.

1.33pm BST

Now this is interesting..... There's a rumour that Alexis Tsipras might organised summer sessions in the Greek parliament, to help drive through the economic reforms agreed with lenders.

"Summer sessions" sound rather cosy and fun; conjuring up visions of MPs sipping Pimms in deckchairs, perhaps, and occasionally passing the odd law.

The aim of switching Parliament to a reduced summer session, where 100 MPs sit instead of the full 300, would be to allow him to choose which SYRIZA MPs attend the votes, thus removing rebel lawmakers and facilitating the passage of legislation pledged to lenders.

According to sources, a presidential decree ordering Parliament to switch to its summer sessions has been drafted and only requires the signature of President Prokopis Pavlopoulos.

July 2014: #Tsipras accused former govt of using Parliament's summer sessions to 'sell-off Greece's public assets'. https://t.co/HUorQFrIB7

Reduced summer sessions of parliament are what Tsipras was blasting Samaras about exactly one year ago http://t.co/DBcqF8hZtS #Greece

1.14pm BST

Here are more highlights from the Spanish parliament's debate on Greece, via the Open Europe thinktank.

Guindos: Spain has shown solidarity with #Greece. We took part in all three bailouts, despite limited exposure and bad economic conditions.

Guindos: Spanish contribution to third Greek bailout will be around a10.15bn. #Greece

Guindos says Spanish exposure to #Greece will rise to around a34bn after third bailout.

Guindos: Irresponsible policies come with a price, especially for the most vulnerable. #Greece

Guindos: We need to move towards fiscal union and, ultimately, towards a political union. #Greece

Moscoso: The Socialist Party backs the bailout deal, but much more is needed for #Greece and Eurozone to return to growth.

Moscoso: Economic situation in #Greece is much worse than six months ago. We think bailout deal must be complemented with humanitarian plan.

Moscoso (PSOE): #Greece has made many mistakes, but so did Europe by insisting too much on austerity.

Moscoso (PSOE): Euro break-up has been avoided, but we're still lacking a medium and long-term strategy. #Greece

Moscoso (PSOE): Debate over Eurozone reform has been led by Hollande and Renzi. You, Mr Rajoy, were absent. #Greece

12.53pm BST

12.51pm BST

Back to the other main issue, Greece's third bailout.

Spain's parliament is now debating whether to support the a86bn loan programme.

"There are serious risks, such as execution risks, given the Greek political situation....

"Populist siren songs only end in mirages."

12.14pm BST

If you're just tuning in, here's our story on UK inflation inching back into positive territory, by Katie Allen:

Britain's inflation rate ticked higher last month, heating up the debate over when Bank of England policymakers will start raising interest rates.

The consumer price index (CPI) measure of inflation edged up to 0.1% in July from zero the month before, defying City expectations for no change and pushing the pound higher.

Following the RPI figure announcement, the passenger watchdog TransportFocus said that while fares are increasing, punctuality is going down for many users.

"The poor performance in the south-east in particular highlights how Network Rail and operators need to deliver a more consistent day-to-day service which passengers can rely on," the watchdog's passenger director, David Sidebottom, said.

11.38am BST

Wall Street's finest (?!) also reckon the UK consumer prices index may dip below zero again soon.

Goldman Sachs still expect UK CPI inflation to drop below zero in the coming months. Updated forecasts: pic.twitter.com/Mndn0AVMHA

11.28am BST

Inflation could easily turn negative again this month, predicts Martin Beck, senior economic advisor to the EY ITEM Club:

"July's uptick in inflation represents something of a false signal. The increase is largely due to clothing prices, with this year's summer sales seeing less discounting than last year's, and an increasing pressure on air fares.

Overall, the modest pickup in inflation appears to be largely a function of temporary factors rather than a sign that inflationary pressures are escalating."

11.27am BST

The pound is continuing to climb, in a fillip to UK readers who haven't taken their summer holidays yet.

Sterling is up over 1 cent against the dollar now, at $1.571, and also gained one eurocent to a1.418.

"While wages are increasing rapidly, this is clearly failing to filter through to inflation. With sterling's current strength and further fiscal tightness planned for the UK, if the MPC pulls the trigger too early on rate hikes it's difficult to see how the Bank of England's 2% inflation target will be reached in any reasonable timeframe.

"Making an assumption that underlying price pressure will suddenly begin to pick up in the coming quarters is an awfully risky call. If the Bank of England has seemed indecisive over rate hikes in recent months, this inflation report is unlikely to give them any reason to get off the fence and act."

10.59am BST

UK house prices continue to outpace the official inflation rate.

Our recent research into this trend showed that by 2025 there will be more private renters than people owning a home with a mortgage, and that over half of the 20-39 age group will live in private rented accommodation.

Today's figures show that house prices are growing at more than twice the rate of average earnings, further squeezing affordability for buyers.

10.51am BST

At just 0.1%, the UK inflation rate remains well shy of the 2% target which is meant to represent stability.

The prime minister doesn't sound worried, though:

It's good news that inflation remains low. Low prices and rising wages show our economic plan is giving working people more security.

10.41am BST

Nick Dixon, Investment Director at Aegon UK, also believes the Bank of England will resist raising interest rates this year:

"Today's news confirming six months of flat prices will be welcomed by pensioners, with macroeconomics now swinging in their favour as they benefit from the 'triple lock' minimum pension increase of 2% per year.

Inflation is being held back by the strong pound and lower oil prices, and is likely to remain minimal in the short term. The inflation figures also raise probability of the first rate hike since 2007 being after Christmas, not before."

10.22am BST

The jump in core inflation, to 1.2%, raises the chances that UK interest rates will rise in early 2016.

Jeremy Cook, chief economist at the international payments company Worldfirst.com, explains:

"Inflation is positive in the UK, and positive for the UK. A period of ultra-low inflation is an obvious benefit for the UK economy - i.e. almost non-existent price rises in goods and services that consumers must buy, such as food and energy - frees up more disposable income elsewhere.

It will also allow people to pay down debt and replenish savings that may have needed to be used during leaner times. This has been the driver of the UK recovery."

Oil remains in a downtrend, as do most commodities. Sterling is stronger than it was this time last year by over 7% on a trade weighted basis and last week's moves by the People's Bank of China will see lower prices sweep in from the East in the next 6 months. For now however, consumers should take the low inflation as good news and leave the worrying to the men and women of Threadneedle Street [The bank of England]".

10.12am BST

Royal Bank of Scotland flags up some of the more interesting changes to inflation in the last year:

Micro matters too. CPI at 0.1% but the price of wine and food fall (yay!) while rents and flights rise (boo). pic.twitter.com/6NJZela9MG

10.08am BST

George Osborne must be on holiday, as he's left the task of commenting on the inflation data to the newly ennobled Jim O'Neill.

Lord O'Neill says low inflation is "great news for working people and family budgets", but also warned that the global economic situation remains "so uncertain".

Read Commercial Secretary to the Treasury, Lord O'Neill's response to today's #inflation figure: pic.twitter.com/G6DNGXMcxK

9.59am BST

Britain's inflation rate is still close to its lowest level in 50 years, having briefly turned negative back in May:

9.53am BST

So, why did Britain's annual CPI inflation rate inch up to 0.1% last month?

The Office for National Statistics says clothing prices fell at a slower rate than a year ago:

Overall clothing and footwear prices fell by 3.4% between June and July this year compared with a larger fall of 5.7% between the same 2 months a year ago. Prices always fall between June and July during the summer sales period.

The downward contribution came from price movements in most sectors - notably in the milk, cheese and eggs sector - where the prices of 2 pint cartons of shop bought milk have fallen. There was a partially offsetting contribution from rising prices in the bread and cereals sector.

9.46am BST

Core inflation at 1.2% and wage growth quite perky. Hard to fret much about UK deflation.

Negative inflation, more like....

9.43am BST

Britain's rail users can expect fares to rise again next year, thanks to today's inflation figures.

Here are rail costs vs earnings and CPI since 2000: pic.twitter.com/gK3XKu9IlI

9.35am BST

The pound has just jumped by almost half a cent against the US dollar, to $1.565, as the inflation data hit the wires.

One reason: core inflation, which strips out volatile factors like energy and food, jumped to 1.2% last month. That's a five-month high, suggesting underlying inflationary pressures are building, putting pressure on the Bank of England to raise interest rates.

Pound spikes higher as inflation comes in slightly stronger than expected. +1.2% core YoY price growth pic.twitter.com/fWZMS9P9Lr

9.33am BST

Breaking: Britain's headline inflation rate turned positive, just, last month.

The Consumer Prices Index rose by 0.1% in July, compared to a year ago, according to the Office for National Statistics. That is up from 0.0% in June.

9.29am BST

The Greek government has made some small tweaks to country's capital control regime, reports Kathimerini:

In legislation published late on Monday, the Finance Ministry now allows the transfer of a500 a month abroad.

It also permits parents to send a lump sum of a8,000 abroad to cover the expenses of children who are studying outside of Greece. The previous limit was a5,000.

9.25am BST

The Open Europe think tank has a handy list of the eurozone governments which must approve the Greek bailout this week, including Spain, Estonia and Austria today:

Which parliaments need to approve 3rd #Greece bailout & how will they vote? I try to lay it out for @OpenEurope http://t.co/hWChDSesjR

An extraordinary parliamentary session has been called for today starting at noon. As with the other Baltic countries which underwent their own significant austerity and internal devaluation programme, sympathy for Greece in Estonia has been limited. However, the reform programme is likely to be seen as sufficient for approval.

9.21am BST

There may be trouble ahead. Ratings agency Moody's has predicted that the threat of a Chinese slowdown, US interest rate hikes, and Greece's problems will all hold back global growth over the next two years.

Here's the full story:

9.16am BST

Europe's stock markets are now falling, as the Chinese rout hits confidence in the City.

The FTSE 100 is down 27 points, or 0.4%, at 6522, led by mining stocks such as Antofagasta (-2%).

9.01am BST

Today wasn't a good day to be playing the Chinese financial markets.

As these photos show, share charts were a sea of green (for losses) as the Shanghai composite index plunged by over 6%.

8.57am BST

Today's UK inflation data, released in around 30 minutes, is particularly important to commuters.

8.43am BST

Wolfgang Schiuble's positive comments about Greece hide his true long-term objectives, reckons Alastair Winter, chief economist at Daniel Stewart & Co:

#Schauble may have given up #grexit but more likely tactical to see if #Tsipras will hang himself enough that even #hollande cannot help

8.27am BST

Yesterday, rumours were swirling that Greece's prime minister would call a confidence vote soon, having suffered his own rebellions over the bailout deal.

Government sources suggested on Monday that Tsipras first wants to discuss with his economic team how the first tranche of Greece's third bailout, which was passed through Parliament on Friday and then rubber-stamped by eurozone finance ministers, will be disbursed.

Athens is due to receive a26bn of the total a86bn as its first installment but this will be broken into sub-tranches, with a10bn going toward recapitalizing Greek banks.

Left Platform's Leoutsakos indicates #Syriza dissidents will not support the government in possible confidence vote ~@MegaGegonota #Greece

8.19am BST

Steve Wang, chief China economist at Reorient Financial Markets Ltd, believes Chinese investors panicked today and lost faith that Beijing would keep propping up share prices.

Wang said (via Bloomberg):

"Investors ran for the exit when the government failed to step in to support the market."

#China's stocks sink most in three weeks on State support concern http://t.co/r239nP5q0I

8.14am BST

The Chinese stock market has suffered another selloff today, as fears of economic slowdown rip through trading rooms.

The main Shanghai index plunged by over 6% in the last hour of trading, the biggest fall in around three weeks.

#CSI300 declines over 6% in late trading in #Shanghai. RO pic.twitter.com/VLurXMM19K

Three new 'tail risks' for BAML. China recession and EM debt crisis at the top. pic.twitter.com/Ps3MeabEkq

8.08am BST

Wolfgang Schiuble sounded remarkably upbeat in his interview with ZDF last night, arguing that Athens has made significant progress recently.

As he put it:

"In the last weeks, things have moved much more quickly than most of my colleagues would have thought possible.

Let's hope that this surge forward continues then Greece really has a chance and we have every interest in it succeeding."

7.59am BST

Overnight, Germany's finance minister did his best to avoid a major rebellion over the third Greek bailout.

"I can argue with full conviction, partly because I haven't taken this decision lightly myself ... that the right thing to do is to vote for this."

7.52am BST

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

Greece will move another few steps closer to receiving its third bailout today. The parliaments of Spain and Estonia are both voting on the plan, while a special subcommittee in Austria will also give the thumbs-up, or down, during the day.

#Greece is almost there: How Europe votes on the 3rd bailout. http://t.co/bPCjmH8eKg

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