UK chancellor vows to avoid repeat of the 2008 financial crisis, at the Bank of England’s first Open Forum

Despite the fall in unemployment, weakening earnings growth could prompt the Bank of England to hold interest rates steadyAt first glance, the latest jobs figures look curious. The economy is creating plenty of jobs. Unemployment is falling. The proportion of people in work has never been higher. These are precisely the conditions in which to expect upward pressure on wages.But pay inflation remains the dog that doesn’t bark. Excluding bonuses, regular earnings in the three months to September were 2.5% higher than in the same three months of 2014. This is down from the 2.8% recorded in the quarter that ended in August.Related: British pay growth slows but labour market remains healthy Continue reading...

The anger and frustration felt by hard-working people who have seen their wages and job security steadily diminish is fuelling a populist revolt against the political establishmentThe standard explanation for why average working people in advanced nations such as Britain and the United States have failed to gain much ground over the past several decades and are under increasing economic stress is that globalisation and technological change have made most people less competitive. The tasks we used to perform can now be done more cheaply by lower-paid workers abroad or by computer-driven machines.The left’s standard solution has been an activist government that taxes the wealthy, invests the proceeds in excellent schools and in other means that people need to become more productive, and redistributes to those in need. These prescriptions have been opposed vigorously by those on the right, who believe the economy will function better for everyone if government is smaller, public debt is reduced and taxes and redistributions are curtailed.In the wake of the junk-bond and takeover mania of the 1980s, economic risks were shifted from corporations to workersThose whose income derives from profits – execs, Wall Street traders and shareholders – have done exceedingly well Continue reading...

Employment rate hit record high of 73.7% but weakened earnings growth could threaten living standards if inflation starts to rise, data showsPay growth for Britain’s workers appears to be slowing sharply, raising questions about the durability of the recent improvement in living standards.Official figures published on Wednesday showed the labour market remained healthy in the three months to September, with the employment rate hitting a record high of 73.7%, and the unemployment rate sliding to 5.3%, its lowest level for more than seven years.Related: Ghosts of crashes past still haunt this consumer ChristmasRelated: Ten facts you might not know about the gender pay gap | Laura Bates Continue reading...

The Guardian’s David Levene goes behind the scenes at the Bank of England in London and brings us a glimpse of a world apart

George Osborne and ECB chief Mario Draghi at Open Forum to attend event where top bankers and finance figures share ideas with the publicThe latest attempt by the government to rehabilitate the battered reputation of the City of London takes place on Wednesday when Mark Carney, the governor of the Bank of England, invites the public to have their say on the future of financial markets.Carney has invited the chancellor, George Osborne, and the president of the European Central Bank, Mario Draghi, to be the guests of honour at a day-long event at the Guildhall in London.Related: Inside the Bank of England | Jill Treanor and Larry Elliott Continue reading...

One academic argues that China selling $60bn of Treasury bonds a month raises US yields by 10 basis pointsFor much of the year, investors have been fixated on when the Federal Reserve will achieve “liftoff” – that is, when it will raise interest rates by 25 basis points, or 0.25%, as a first step toward normalising monetary conditions. Markets have soared and plummeted in response to small changes in Fed statements perceived as affecting the likelihood that liftoff is imminent.But, in seeking to gauge changes in US monetary conditions, investors have been looking in the wrong place. Since mid-August, when Chinese policymakers startled the markets by devaluing the renminbi by 2%, China’s official intervention in foreign exchange markets has continued, in order to prevent the currency from falling further. The Chinese authorities have been selling foreign securities, mainly US Treasury bonds, and buying up renminbi. Continue reading...

Since the crash, it has become more powerful than ever, but has the Bank got any better at spotting trouble? Larry Elliott and Jill Treanor are granted extraordinary access to this secretive institutionUp the stone steps. Through the heavy doors. Into an ornate lobby to be greeted by a security man wearing a pink frock coat and a top hat. These are a visitor’s first impressions of the Bank of England. The man in the fancy clothes, Reg Shaw, has worked there for 27 years. His coat is cleaned once a month. His top hat is custom-made by Patey of Mayfair, which has been making hats since 1695 – the year after the Bank of England opened its doors for the first time. All this sends a clear message: this place is old, this place is serious, this place has its own way of doing things. Like a medieval monastery, it is walled-off and self-contained. Behind this imposing facade, which occupies a three-acre site on Threadneedle Street, is one of the most powerful institutions in Britain.Upon entering, it feels a little like a mausoleum. The ceilings are high and there are mosaics on the floor. People speak quietly and walk with a measured tread. The corridors and stairwells form an intricate maze, in which staff sometimes get lost. It is not hard to see why some of the 2,200 people who work here fondly refer to it as Hogwarts.The new governor is keen to show that the modern Bank is more than a bunch of economists sitting above a bullion vaultThe Bank failed to spot the bubble in the housing market or do enough to rein in the excesses of the City Continue reading...

Investors have taken fright at the prospect that the US Fed could raise interest rates at the point when China is experiencing persistently weak demandStock markets in Asia Pacific have continued to slide as the spectre of higher borrowing costs in the United States and further signs of weakness in China prompted investors to trim their exposure to riskier assets.The recent rally that followed the market selloff in July and August has petered out as poor Chinese inflation figures on Tuesday pointed to persistent weak demand in the world’s second biggest economy.Related: US Federal Reserve is right to raise interest rates, yet risk remains Continue reading...

Like-for-like sales down 0.2% on same month last year, suggesting consumers delaying spending until US-inspired discount day in NovemberBritain’s retailers experienced a drop in sales last month, according to industry figures that suggest shoppers are putting off spending in anticipation of the discounts on Black Friday at the end of November.The British Retail Consortium also said that with Halloween falling on a Saturday this year fewer people went shopping on that key day for the sector. Retail sales in October were down 0.2% on a like-for-like basis compared with the same month last year, according to the BRC’s monthly retail sales monitor. The drop marked a change in fortunes after a sharp 2.6% rise in annual sales in September – although those figures were distorted by the timing of the end of summer bank holiday.Related: Angry Argos bargain-hunters complain at online sales glitch Continue reading...

Eurozone ministers have given Greece a few more days to deliver reforms, and unlock billions of euros of loans and new capital for its banks

European leaders are at odds with Athens over protection for families at risk of losing their homes because of mortgage defaultsEuropean leaders have told Greece that it must do more to prove it is pushing through the reforms its creditors have demanded before it can receive a €2bn (£1.4bn) aid payment.

Industry body fails to reflect different opinions of UK businesses but heckling the PM at CBI conference misses the markHow to spoil a half-decent point with a silly stunt. The Vote Leave students who heckled David Cameron’s speech to the CBI conference came across as wanting to squash debate on Europe. If, as suggested, similar protests are planned at the annual meetings of companies with pro-EU bosses, the tactic will become tiresome and probably self-defeating.Yet, on the narrow issue of the CBI’s utterances on Europe, there is a fair criticism to make. The problem is not that the CBI gets 0.6% of its funding from the European commission for use of its economic surveys – the percentage is so small it is not worth making a fuss about. Continue reading...

Thinktank says governments should boost spending and investment to support growthA sharp slowdown in global trade on the back of China’s troubles poses a threat to economic growth and calls for richer countries to step up investment while keeping monetary policy loose, a leading thinktank has warned.OECD cuts global growth f'cast to 2.9 for 2015, 3.3% for 2016, from 3.0 and 3.6 in Sept. Sept (left) and Nov tables pic.twitter.com/6aHTtIfch0 Continue reading...

Treasury, environment, transport and communities departments cede to chancellor’s austerity demands, but home and foreign ministries dig inFour government departments have agreed deep spending cuts of 8% a year for the next four years, George Osborne will announce.The Treasury and the Departments of Transport, Environment, and Communities and Local Government are the first ministries to agree cuts in a spending review intent on slashing £20bn from the cost of government.Related: How the spending review should look if the government wants a happier Britain | Gus O'Donnell Continue reading...

Shares in the Australian mining giant plunge to lowest since the global financial crisis as it announces it might cut its iron ore outputFalling commodity prices and the aftermath of the Brazil dam disaster have combined to push shares in the mining giant BHP Billiton to a seven-year low, helping to drag the wider Australian market down sharply.Related: Brazil dam burst: BHP boss to inspect disaster zone with dozens still missingRelated: Slowing growth in China raises red flag for global economy Continue reading...

Wages will increase by an average of 2% over the next year as employers continue to recruit workers, according to CIPD surveyPay rises will remain subdued over the next year, despite Britain’s robust recovery and complaints from business leaders of acute skills shortages, according to a survey of employers.Wages will increase by an average of 2% over the next year as UK employers continue to recruit the workers they need without significantly hiking wages.Related: Living wage rises further above government's 'national living wage'Related: World's young jobseekers still struggling, says ILO Continue reading...

Kilkenomics event, in which financial insiders are grilled by comedians, shows that the underlying issues of the eurozone crisis remain unresolvedThe court is in session. The jury has been chosen and the public gallery is packed. The clerk has sworn in the first witness and the trial in Kilkenny’s courtroom No 2 is ready to begin.This, though, is a tribunal with a difference. It is not an individual in the dock but economics. The event is part of the Kilkenomics festival, four days in which economists, financial experts and media commentators are asked questions by Ireland’s standup comedians. Continue reading...

The narrative of economic recovery seems to promise a seasonal retail bonanza. But, as the Bank of England recognises, things are not as festive as they appearBritain’s retailers are hanging out the tinsel and looking forward to a bumper Christmas, with unemployment down, living standards finally climbing and house prices on the rise. But if everything is set fair for a festive blowout, why does the Bank of England still think it’s too soon to raise interest rates?Part of the answer is that, as governor Mark Carney made clear at his quarterly inflation report briefing last week, the shaky state of global economies, including China’s, means they have to balance the strength of domestic demand against over headwinds from overseas. But it’s more than that: the Bank is acutely conscious that the recovery remains fragile, unbalanced and vulnerable to external shocks. Continue reading...

Director-general John Cridland says criticism of lobby group’s pro-EU stance is like badge of honour and insists he has a strong mandateThe business lobby group CBI has dismissed accusations that it is misrepresenting the views of its members on the EU referendum, insisting that the majority want to stay in a reformed EU.After the claims this week by the Vote Leave campaign, outgoing CBI boss John Cridland said his critics were avoiding the real policy issues in the in-out referendum debate.Related: CBI comes out strongly in favour of Britain staying in EURelated: Business secretary Sajid Javid attacks CBI over EU referendum Continue reading...

A major employment boost and hourly wages rising suggest this is the time to act, but the US economy is not free of problemsJanet Yellen’s finger is poised over the button. The US Federal Reserve will finally take the plunge and raise interest rates when it meets again just before Christmas. The days when borrowing costs were kept at zero are coming to an end.That was the interpretation Wall Street was putting on Friday’s news that the world’s biggest economy created 271,000 extra jobs in October and, barring a big domestic or global crisis in the next month or so, it is almost certainly the correct one.Related: US looks set for December interest rate rise after jobs boostRelated: Fresh signs of slowdown will force interest rates rise to be put on hold Continue reading...

It was obvious interest rates would not rise for some time – and it is concerning that the Bank seems not to have realised thisWhen you miss the goal, shift the posts. That is the Bank of England’s standard procedure as it tries to convince businesses and households that it can read the path of economic recovery and indicate when the next interest rate change is coming.But this tactic, aired again on BBC radio on Friday by the Bank’s deputy governor, Nemat Shafik, is delivering diminishing returns and can hardly be considered part of a winning strategy.Related: Bank of England deputy governor says focus on date of rate rise is misleading Continue reading...

Bank of England decides to keep interest rates at 0.5% until well into 2016 Continue reading...

Data showing factory output has increased and trade deficit has been reduced will make George Osborne smile in runup to autumn statementGeorge Osborne has received some good news before this month’s autumn statement on the economy, with data showing output from Britain’s factories has risen and the trade gap with the rest of the world has narrowed.Related: Osborne expected to soften impact of tax credit cuts in autumn statementRelated: Surprise manufacturing surge is probably more blip than boom Continue reading...

On the words ‘climate change’ being absent from the TPP, trade minister Andrew Robb says: ‘It’s not an agreement on with climate change, it’s a trade agreement’Overnight, thousands of pages of text of the Trans-Pacific Partnership have been released, ending months of secrecy. As experts around the world begin the task of poring over the detail, here are four key issues to watch.

Trade minister rejects concerns about sparse attention given to climate change in 6,000-page Trans-Pacific Partnership documentThe Australian government “led the charge” to ensure that the world’s largest trade deal, the Trans-Pacific Partnership, had adequate safeguards for environmental policy, the trade minister, Andrew Robb, has said.The full text of the 6,000-page document was released on Thursday night, and already groups are expressing concern over the sparse attention given to climate change in the deal.Related: Turnbull: Trans-Pacific Partnership 'a foundation stone for future prosperity’Related: TPP deal: US and 11 other countries reach landmark Pacific trade pact Continue reading...

Leading economists and fund managers give their thoughts on when the first rate increase will comeThe Bank of England has sent a reassuring message to businesses and households that interest rates are to remain at their record low of 0.5% for a while as it lowered its forecast for near-term inflation.The Bank’s monetary policy committee left monetary policy unchanged, as expected, at its monthly meeting, but the surprise was that no one joined Ian McCafferty in voting for an immediate quarter-point rise.The Super Thursday announcements from the MPC are on the whole quite dovish ...At the same, though, the MPC has sent a warning to markets that they have lowered their rate expectations too far. The Inflation Report forecasts are based on rate expectations in the 15 working days to 28 October – which at that time were for the first rate rise to come in Q2 2017. And they show inflation projected to be a bit above the 2% target at the policy horizon.Related: Bank of England leaves interest rates at 0.5% until well into next yearThis clear dovish shift in the BoE’s thinking seems a little odd in an environment where the growth numbers are looking pretty good and where service sector inflation is pushing higher (currently 2.5% year on year). Even if energy prices stay flat, we should be looking at headline inflation above 1% in early 2016.Furthermore, next week’s labour report is expected to post another decent jobs gain and wage growth figure. Still, the BoE’s assessment has diminished the prospect of a near-term Q1 2016 hike, but we remain comfortable with our view that they will start tightening in Q2 2016 – after the Federal Reserve, but well ahead of market expectations. Interestingly we also got some forward guidance on when the £375bn QE programme will start to be unwound – only when bank rate approaches 2%, which is at least two years away.”The RBS forecast remains for the first bank rate hike to come in August 2016. Whilst a US Fed hike in December 2015 could reignite expectations of a BoE move in February 2016, we are at the margin more comfortable with our relatively dovish forecast versus the City economists.”No fireworks from the Bank of England today, with just the one MPC member calling for a rate rise. Wage growth may be relatively robust but inflation has dipped back into negative territory and the growth outlook remains uncertain following a volatile summer. With half the world’s central banks cutting rates or planning to expand their own QE programmes, the Bank of England will be worried that hiking now could push up sterling and trigger further deflationary pressures. Therefore the record-low 0.5% base rate may well be celebrating its seventh birthday in March.”Related: Super Thursday: Bank of England votes to leave rates on hold - liveToday’s Super Thursday releases from the UK MPC sound dovish, but they still leave the door open to a rate increase in about six months’ time. The committee lowered its central forecast for CPI inflation over the next 18 months. But this mainly reflects different assumptions for the impact of lower import prices, which the committee has said it will look through.At the two-year horizon, it still expects inflation to be slightly above its target, and to rise further thereafter. Since this projection assumes that bank rate follows the path implied by market interest rates, the MPC appears to anticipate tightening policy earlier than Q4 2016, the markets’ current expectation. Continue reading...

Release offers first detailed look at 12-state Trans-Pacific Partnership, world’s largest free trade agreementNew Zealand has put the text of the Trans-Pacific Partnership (TPP) online, offering the first detailed look at the world’s largest free trade deal, the most ambitious effort in years to remove barriers to commerce.

Decision by 8-1 will reassure businesses and households as MPC gives no indication of imminent rise, while Bank cuts inflation forecastThe Bank of England is ready to step up controls on the housing market if a prolonged period of record low interest rates risks inflating a property bubble, governor Mark Carney has said. As he signalled that interest rates were likely to remain on hold well into next year, Carney suggested the Bank may have to revert to other measures, such as tighter lending rules, to keep a lid on house prices.Speaking after news from lender Halifax that house prices had jumped almost 10% from a year ago, he raised concerns that households were saving less and that some would end up overstretching themselves. More action could be warranted from the Bank, which has the power to clamp down further on mortgage lending as part of its macro-prudential tools.

French economists moot €180 levy on business class tickets to help vulnerable countries adapt to the impacts of climate change, reports Climate HomeAir travel should be taxed to protect the world’s vulnerable from drought, flooding and sea level rise. Continue reading...

Global economy will be transformed over next 20 years at risk of growing inequality, say analystsA “robot revolution” will transform the global economy over the next 20 years, cutting the costs of doing business but exacerbating social inequality, as machines take over everything from caring for the elderly to flipping burgers, according to a new study.As well as robots performing manual jobs, such as hoovering the living room or assembling machine parts, the development of artificial intelligence means computers are increasingly able to “think”, performing analytical tasks once seen as requiring human judgment.Related: Robot doctors and lawyers? It’s a change we should embrace | Daniel SusskindRelated: Work in the year 2525, if man is still alive… | LettersRelated: Robots can take over some of our jobs. But some things only humans can do | Brooks Rainwater Continue reading...

Zoe Williams puts forward an extraordinary argument (There’s plenty more space for humanity on this ‘tiny’ island, 2 November). She suggests that because “only” 10.6% of England’s land area is urbanised there is room for a great many more people than currently live here. This ignores lots of things, but let’s focus on one: food.Despite an intensive agriculture that depends heavily on pesticides, fertilisers and diesel fuel for tractors, neither England nor the UK is self-sufficient in food. In fact we import 40% of our food, and the proportion is rising. That might not matter if we could be sure that we’ll be able to import food in increasing quantities. Continue reading...

Federal Reserve chair tells House committee that no decision has been made but a rise in rates is still a ‘live possibility’ despite continued low inflationA December interest rate increase is still on the table, US Federal Reserve chair Janet Yellen said Wednesday during testimony before the House financial services committee.Asked by New York congresswoman Carolyn Maloney, a Democrat, whether the risk of raising rates in December outweigh the benefits, Yellen said that the committee has made no decision yet but that December rate hike was still a “live possibility”.Related: Federal Reserve keeps interest rates unchanged but hints at December riseBill Dudley on December liftoff: "I fully agree with the Chair. It is a live possibility, but let's see what the data shows" Continue reading...

Monthly Markit/CIPS services PMI survey shows more job creation and employment in UK’s leisure and IT industriesThe UK’s dominant service sector moved back into growth in October, but the rate of expansion remained weak, a new survey shows.The rate of growth for service industries, which span hotels, restaurants, IT and finance, rose for the first time since June, according to the monthly Markit/CIPS services PMI published on Wednesday. Continue reading...

October’s purchasing managers’ index for the building industry shows the sector in rude health, according to analystsA surge in new work across the UK construction industry in October cheered financial markets and sent the pound close to a 10-week high against a basket of currencies.Building firms took on new work at the fastest rate for a year, according to the CIPS/Markit purchasing managers’ index (PMI) for the construction industry. The index, published on Tuesday, suggests the British economy has recovered quickly from the turmoil caused by China’s dramatic slowdown. Continue reading...

As Australia goes to the races, the RBA resisted a gamble to reduce rates. Follow the reaction to the day’s other big event with Greg Jericho and Martin Farrer4.39am GMTOk. That’s it from me as well. Thanks for reading.There is now a news story on this afternoon’s decision here which I will update with reaction.4.18am GMTWell, fancy that.The Cup winner Prince Of Penzance was the same price as the RBA increasing the cash rate by more than 0.25%, namely $100.4.02am GMT3.58am GMTThe ASX/S&P200 is more or less back to where it was when we started out.After a sharp fall just after the announcement (no cut=no cheap money), it bounced back up when traders digested the fine print where Glenn Stevens gave himself room for a cut in coming months.3.53am GMTAnd so it would seem the RBA is slightly more happy about our economy than it was a month ago. And yet just to keep us all guessing it seems more willing than a month ago to lower rates if need be.What that would suggest is that should the US Fed not lower rates, and should any economic data take a downward turn, the RBA might just be willing to cut rates at least one more time.3.50am GMT3.47am GMTLooking at the statement it would seem the RBA is becoming less worried about housing prices.In October it said that “prices continue to rise strongly in Sydney and Melbourne”. Today they dropped the “strongly” adjective to make it:Dwelling prices continue to rise in Melbourne and Sydney, though the pace of growth has moderated of late.3.46am GMTTraders not quite sure where it’s going after that statement.3.43am GMTOk. Back to Greg, who’s been reading the statement more carefully than me.As Martin and Stephen Koukoulas noted, the big change in the statement is the final paragraph.At today’s meeting the Board judged that the prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting.Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.3.39am GMTBut it does add:Members also observed that the outlook for inflation may afford scope for further easing of policy, should that be appropriate to lend support to demand.3.37am GMTRead the full statement from RBA governor Glenn Stevens here.But the highlight is probably this phrase:At today’s meeting the Board judged that prospects for an improvement in economic conditions had firmed a little over recent months and that leaving the cash rate unchanged was appropriate at this meeting.3.33am GMTCould the Melbourne Cup be as exciting?3.30am GMTCASH RATE STAYS AT 2%.3.26am GMTAnd lastly as ever he value of the dollar hovers over the decision. Currently the dollar is trading at around US71.71c, a bit higher than it has been of late but still well below where it has been for the past 18 months:3.23am GMTOne factor that will be in the RBAs thinking is the moves of the big four banks to raise rate independently over the past month. The moves (as I wrote about here) were in response to new measures brought in by the financial regulator Apra.The regulation meant banks had to raise rates if they wanted to maintain their level of profitability.3.18am GMTBut what is going to increase demand? Today the RBA released its latest index of commodity prices and just in case you have been asleep since 2012, it reminded us all that the mining boom is done:3.15am GMTThe other big question though is why would the RBA want to get people taking out more loans to build more houses. Yes construction is a life blood of our economy – and the housing sector is a vital part – but have you seen how much debt we’re in at the moment?The RBA recently revised its calculations for the level of household debt to disposable income. The good news was that it lowered its estimate of total debt, the bad news is its calculations show the levels of debt are rising faster than was previously though.

The chancellor’s maths are finally outrunning his politics. If he doesn’t U-turn he’ll have to keep hitting striving families again and againOver the past five years the biggest question in British politics has been this: how might George Osborne’s cuts be stopped? In a decade that will be defined by austerity, this remains the problem that underpins all the others in our politics. Suddenly, we’ve been given a possible answer.Many lessons can be drawn from the debacle over cuts to tax credits, and the remarkable past fortnight – in which the Sun took up arms against the party it helped create, in which a desperate mother shouted “shame on you” at the Tory she’d voted into government, and the habitually sedated House of Lords stumbled into rebellion.Related: Now austerity is hitting strivers, how will the Tories sell it? | Suzanne MooreOver the next five years, austerity will produce many more episodes like the war over tax creditsRelated: Remember Strangeways, 1990? The bad old days of inhumane prisons are back | Eric Allison Continue reading...