We shouldn't be too cosy and trusting with the banks.Thanks for stating the bleedin obvious
The Bank of England needs to abandon a culture of cosy chats and too much trust in banks following the latest financial scandal to hit London, former policy maker Adam Posen has said.
Mr Posen, who served on the central bank's Monetary Policy Committee from 2009 to 2012, said BoE staff had had too much confidence that banks would regulate themselves and would root out bad behaviour by their own traders.
Adam Posen
Earlier this month the BoE suspended an official as part of an ongoing investigation into whether the central bank had turned a blind eye to the alleged rigging of exchange rates in London's $2.1 trillion-a-day currency market.
Mr Posen welcomed Ms Shafik's appointment, and the promotion of his MPC colleague, Ben Broadbent, to become deputy governor for monetary policy.
But he said that it would be more important to change a culture of too much trust in banks, which had also afflicted other central banks, including the US Federal Reserve.
"There has to be a top-down explicit statement that our bias is towards having market solutions, not cosy conversations with individual bankers, that the Bank of England is neither the friend nor the enemy of the banks," he said.
Mr Posen also criticised the forward guidance policy on interest rates that Mr Carney launched in August, calling it "irresponsible" for encouraging the public to focus on a single economic indicator - unemployment - as a guide to when interest rates would rise.
He welcomed a change to the policy last month, when the central bank said it would look at a wider range of data after unemployment fell to the 7pc threshold set in August.
Mr Posen, who now heads the Washington-based Peterson Institute for International Economics, also praised the open discussion at MPC meetings and joked that the biscuits served to policymakers were "cheap but fattening".
The markets are going to love you!
An Egyptian-born mother of twins who believes women are hindered by ‘a sticky door’ rather than a glass ceiling yesterday landed one of the biggest financial jobs in Britain.
Dr Nemat Shafik will become only the second female deputy governor of the Bank of England in August.
As well as helping to set interest rates, the Bank said Dr Shafik must also mastermind the ‘eventual exit’ from its £375 billion quantitative easing programme
Dr Nemat Shafik
It is the latest extraordinary twist in the meteoric career of a woman whose childhood experiences might have thwarted others’ ambitions.
She was born in Alexandria, Egypt but her family forced to flee at the age of four to escape General Nasser’s nationalisations of the 1960s.
Robbed of their possessions, they fled to America, and Dr Shafik has subsequently said the traumatic experience has left ‘a strong legacy’.
She said: ‘My father in particular, I think, never got over that, having lost everything.’
But her career has been spectacularly successful ever since, becoming the youngest-ever vice president of the World Bank at the age of just 35.
After leaving the World Bank, she moved to the Department for International Development, rising to become its permanent secretary between 2008 and 2011.
Since April 2011, she has been the deputy managing director of the International Monetary Fund.
Dr Shafik, who speaks English, Arabic and French, used to be married to the super-wealthy Mohamed El-Erian, the former chief executive of Pimco, the world’s largest bond house.
In 2002, she married Raffael Jovine, with whom she had the twins, and is also step-mother to his three daughters.
Dr Shafik, who is a national of Britain, America and Egypt
The British budget lowdown
George Osborne was accused of compounding the problems facing Britain’s “jilted generation” of young people after he unveiled a “silver savers’ Budget” aimed at winning the over-50s vote at next year’s general election.
The Chancellor’s big surprise was a sweeping shake-up of pensions and savings which will allow people to draw down all of their pension pot in cash when they retire, instead of having to buy an annuity to provide an annual income.
George Osborne
The limit for tax-free individual savings accounts (Isas) will be raised to £15,000 a year and pensioners will be able to buy new bonds with above-market interest rates.
What Mr Osborne hailed as “a Budget for the makers, doers and savers” was widely seen as an attempt to target the over-50s before next year’s general election. The “grey vote” is a key group because it turns out in much higher numbers than young people. It includes many natural Conservative supporters, some of whom have been attracted by the UK Independence Party.
The Chancellor regards the biggest reforms to pensions since 1921 as his second most important measure after his drive to balance the nation’s books. However, the small print reveals that the pensions changes will bring in £1.2bn to the Treasury by 2018-19 because people will pay income tax on the money they take out of their pension pots.
Insurance shares plunged by £3bn after the Budget, with leading annuities providers including Legal & General, Aviva, Standard Life and Prudential seeing sharp share price falls.
Mr Osborne could bask in a much better outlook for the economy. The Office for Budget Responsibility (OBR) revised its growth forecast for this year to 2.7 per cent, up from its 2.4 per cent figure in December. It predicted growth of 2.3 per cent next year and 2.6 per cent in 2016. The OBR revised down its borrowing figure for the current financial year from £111bn to £108bn, saying it would fall to £95bn next year and predicting a £5bn surplus by 2018-19.
The Chancellor said his spending cuts would have to continue after the election, adding: “The question for the British people is: who has the credibility to deliver them?” He tried to set a trap for Labour by imposing a £119bn cap on the welfare budget by 2015-16, covering all areas except the basic state pension and jobseeker’s allowance. But Labour said it would support the cap in a Commons vote next week.
Mr Osborne found room for some limited pre-election sweeteners – a 1p a pint cut in beer duty; freezing the duty on spirits and ordinary cider and halving bingo duty to 10 per cent. Business received help with energy bills, and new tax breaks and incentives to encourage companies to invest and export.
The Chancellor confirmed that the personal tax allowance would rise from £10,000 next month to £10,500 in April next year. As The Independent revealed on Saturday, he rejected growing calls from Conservative MPs to aid the middle classes by bringing in a higher than expected threshold for the 40p tax band. It will rise by 1 per cent, less than inflation, in each of the next two years – from £41,450 to £41,865 next month, and then to £42,285 next year, effectively dragging more people into the 40p band as their incomes rise.
The Liberal Democrats trumpeted the £10,500 personal tax allowance that Nick Clegg had demanded in November, going further than his £10,000 flagship policy at the 2010 election. In a Coalition trade-off, the Liberal Democrats approved Mr Osborne’s “savers’ package”, which was not their top priority.
Labour argued that the pensions and savings measures would provide most help to the rich and would not tackle the cost of living crisis. Ed Balls, the shadow Chancellor, welcomed moves to “empower” people to get a better deal on annuities amid low rates but warned that many could end up with a bad deal. “Will we have people disadvantaged or taken down the wrong road?” he asked. “Will we have people running out of money and forced to rely on the welfare state?” Mr Balls said the savings ratio, the proportion of people’s disposable income they save, would decline rather than rise.
Labour joined charities in highlighting a “generation gap” in the Budget. A Labour source said: “There was absolutely nothing to help young people, despite record unemployment. After this Budget, they are left even further behind.”
William Higham, Save the Children’s director of UK poverty, said: “The Budget was a missed opportunity to address the needs of families that are struggling to pay their food bill and children whose parents cannot afford to pay for uniforms and school trips.”
Osborne aides insisted that young people would benefit from the higher Isa limits; the rise in the personal allowance; an extension of the Help to Buy scheme and more apprenticeships. They denied that the savings shake-up would benefit the rich, saying that three-quarters of the five million people who currently saved up to their cash Isa limit were basic rate taxpayers.
Ros Altmann, a Downing Street pensions adviser under Tony Blair, said it was “a brilliant Budget for Tory election prospects.” Chris Sanger, the head of tax policy at Ernst & Young, said Mr Osborne’s “great granny giveaway” would “make saving for a pension much more attractive”.
But Nigel Green, the chief executive of the deVere financial advisory group, warned: “This policy of allowing a full drawdown [of pension pots] is extremely dangerous and ill-conceived for both individuals, who are considerably more likely to become financially dependent on the state, and the wider economy, which needs the population to be as financially independent as possible.”
Budget 2014: The key changes
* Level at which people start paying income tax to be increased to £10,500.
* Cash and shares Isas to be merged into single New Isa with £15,000 annual limit.
* All restrictions on access to pension pots to be removed, ending the requirement to buy an annuity.
* New Pensioner Bond available from January.
* Beer duty cut by 1p a pint while duty on spirits, whisky and ordinary cider is frozen. Tobacco duty to rise by 2 per cent above inflation.
* All long-haul flights to come under lower rate of Air Passenger Duty currently charged on flights to US.
* Help to Buy for new-build homes extended to 2020.
* Bingo duty halved to 10 per cent but duty on fixed-odds terminals rises to 25 per cent.
* Package to cut energy bills.
Interest rate set to rise to 3% as OECD says Brits going to grow
Interest rates will soar to 3% by 2017, as Britain’s economic recovery begins to fully gather momentum, the Bank of England governor Mark Carney has identified.
Carney estimated that rates would soar up from their current historically low value of 0.5% in the next three years, forecasting that they could eventually reach as high as 3% at the end of 2017.
Mr Carney’s comments are thought to be a direct response to an announcement made by the Organisation for Economic Co-operation and Development, who this week identified the UK as the country with the quickest growing economy in the western world.
The OECD estimated that Britain’s economy would grow by an astonishing 3.3% during the first 6 months this year, taking its growth rate past any G7 country at present.
The governor had previously refused to buckle under intense pressure to raise interest rates prematurely, citing that the country’s economic recovery thus far has been ‘unsustainable’. He argued that other factors such as labour productivity and real wages had to pick up before he would begin to raise rates, and outlined that he would attach the speed in which he would implement hikes to the country’s overall economic performance in the future.
However, the OECD’s forecasts have likely given him the assurance he has been looking for on the country’s economic recovery, though he has still maintained a cautious stance and identified that he will only adopt a reactionary approach when it comes to raising rates in the future.
“When the time comes, a welcome time to raise rates, we expect it to be gradual, and the degree to be limited,” he said.
- See more at: http://www.moneyexpert.com/news/interest-will-rise-3-2017-says-bank-england-governor-carney/800582699#sthash.SDBBmqSu.dpuf
A strong pound could lead to low rates for longer
The Bank of England could keep interest rates lower for longer if sterling strengthens much more, the Bank deputy governor Charlie Bean said on Monday, in a rare comment by the central bank on the level of the pound.
Bean said that sterling's current level was "fine", but that Britain would find it harder to enjoy a solid export-based recovery if the currency strengthened any more.
He also cautioned against getting "too hung up" about exactly when the central bank will raise interest rates from their record low 0.5 percent, after financial markets and other policymakers pointed to spring 2015 as a possibility.
Charlie Bean
In a speech to local businesses in Darlington, north east England, Bean said there were clear signs Britain's economy was on the mend, but that it was "early days" and the trade deficit needed to narrow to put growth on a more solid footing.
"Any further appreciation of sterling, which has risen almost 10 percent in trade-weighted terms since March, would not be particularly helpful in terms of facilitating a rebalancing towards net exports," Bean said.
In a question and answer session after his speech, he said a stronger sterling would could reduce inflation because of weaker import prices.
"We would be more likely to undershoot the inflation target in the medium term, and that would mean we would need to keep policy looser for longer than would otherwise be the case."
Last month Ian McCafferty, who sits alongside Bean on the BoE's rate-setting Monetary Policy Committee, also said further sterling strength would be a worry and could potentially make the bank delay raising interest rates.
Bean said British exports had been somewhat disappointing - especially in the services sector - although he said there were some more positive stories of businesses bringing back activities that had previously moved offshore.
Bean also warned against pinpointing spring 2015 as the date when the Bank would raise interest rates.
"(The) market curve implies a first rise in Bank Rate in the spring of 2015, though I should stress that we are likely to learn a lot between now and then about the pace of the recovery, the amount of slack and the evolution of supply, and the impact on costs and prices," he said.
"So I would counsel against getting too hung up about the precise date at which Bank Rate first rises."
McCafferty and fellow MPC member Martin Weale had both cited spring 2015 as a possibility for the first rate hike in recent interviews.
Bean said that when the Bank does raise interest rates it will do so gradually, and that rates are likely to remain below their pre-crisis average of around 5 percent "for some time" - perhaps around 2-3 percent, echoing the new forward guidance given by Governor Mark Carney last month.
But Bean did not go quite as far as MPC member David Miles, who last month suggested the "new normal" for monetary policy would be interest rates averaging below pre-crisis levels.
Bean said it was possible the Bank might not sell back all of the 375 billion pounds ($627 billion) of gilts which it bought under its quantitative easing stimulus scheme. Because banks might want to park more reserves at the Bank due to tighter regulation after the financial crisis, the Bank might need to hold more gilts as a counterparty.
"We may not be in a position to sell all of the gilts back, and some of them will of course roll over naturally," Bean said. The Bank has said it will reinvest the proceeds of maturing gilts while interest rates remain at 0.5 percent, but has not said what it will do after that.
MPC member David Miles also made the point in a speech last month that the Bank might need to hold on to government bonds as collateral for banks' reserves.
Bean said that although Britain's economic recovery has so far been driven by household consumption and housing market activity, there were reasonable grounds to believe business investment would take over as a major driver for the recovery.
He also said there was more scope for housing investment to continue driving growth, although perhaps only a little room for the household savings ratio to drop further as consumers save less as a proportion of their income.
The BoE's Financial Policy Committee was keeping a "beady eye" on the housing market, he added.
"(There) is a risk that increased demand for housing ends up mainly in higher house prices rather than more houses. If associated with excessive expansion in mortgage lending, that may create future financial stability risks."
"It is not a piece of cake. It is going to be hard work."-Merkel in Britain
Following a Downing Street meeting with Prime Minister David Cameron, Angela Merkel said both countries could bring in laws to restrict benefit tourism, as part of "overall European cooperation".
Mr Cameron said changes to the EU were "possible, achievable and doable".
Mrs Merkel addressed Parliament earlier what the full video https://www.youtube.com/watch?v=lmusV-7BMzM
- and later had tea with the Queen.
She also had a meeting with Mr Cameron in Downing Street, with a picture being released of the two of them chatting on the sofa in the Camerons' flat.
David Cameron and Angela Merkel
Mr Cameron is keen to negotiate changes to the UK's treaties with the EU ahead of a promised referendum on whether the country should remain in the organisation, which he wants to hold before the end of 2017.
He regards Mrs Merkel as a key figure in achieving his aim and has organised several events to welcome the German leader during her one-day visit to London, including tea with the Queen at Buckingham Palace.
At the Downing Street press conference, Mr Cameron said he and Mrs Merkel "both want to see changes in Europe".
He added that EU rules on freedom of movement needed to change to ensure people could not move from country to country to sign up for welfare payments.
Angela Merkel addressed both Houses of Parliament during her one-day visit
Mrs Merkel said the UK and Germany could pass laws to limit this problem, saying: "Where there's a will, there's a way."
She said freedom of movement was intended to allow people to work in different countries, not "having immigration into social systems".
However, speaking of changing the EU, she said: "It is not a piece of cake. It is going to be hard work."
Mrs Merkel told assembled political and business leaders: "Some expect my speech to pave the way for a fundamental reform of the European architecture which will satisfy all kinds of alleged or actual British wishes. I am afraid they are in for a disappointment.
"Others are expecting the exact opposite and they are hoping that I will deliver the clear and simple message here in London that the rest of Europe is not prepared to pay almost any price to keep Britain in the European Union. I am afraid these hopes will be dashed."'
Mrs Merkel hailed the peace and stability she said the European Union had brought, saying war between EU member states was now "inconceivable".
Mrs Merkel's speech was well received by the UK parliamentarians
She praised the "unparalleled success" of the EU free market - and the freedoms she said European integration had delivered - but stressed that "we need to change the political shape of the EU in keeping with the times".
She told the UK's gathered political leaders the SU had to become stronger, saying: "In order to attain this goal we need a strong United Kingdom with a strong voice inside the European Union.
"If we have that, we will be able to make the necessary changes for the benefit of all."
The Guardian reported on Wednesday that Berlin was prepared to offer "limited opt-outs" to the UK over its future compliance with existing EU directives and to make sure some other regulations were more flexibly enforced.
The newspaper said it was a sign of the lengths that Germany was willing to go to to ensure the UK remained a member of the EU amid fears in Europe that a referendum could lead to British withdrawal.
But BBC Berlin Correspondent Stephen Evans said sources close to Mrs Merkel were playing down expectations of new proposals for the kind of changes British Conservatives wanted to see.
Although not an official state visit - Mrs Merkel is not head of state - the trip has been planned for months, with both governments aware of its political significance at a time of looming change in Europe.
Mr Cameron has said that if the Conservatives win the 2015 election, he will seek to renegotiate the terms of the UK's membership of the European Union and put the outcome to an in-out referendum of the British people in 2017.
But he faces a battle to convince leaders of other EU member states to agree to the treaty changes he will need, with French President Francois Hollande recently telling the prime minister, on a one-day visit to the UK, that it was "not a priority".
The leader of Mr Cameron's junior coalition partners, the Liberal Democrat Deputy Prime Minister Nick Clegg, and opposition leader Ed Miliband, who both oppose calls for a referendum and who have warned that Conservative calls for a root-and-branch renegotiation will alienate EU leaders, also held separate meetings with Mrs Merkel.
We shouldn't be too cosy and trusting with the banks.Thanks for stating the bleedin obvious
The Bank of England needs to abandon a culture of cosy chats and too much trust in banks following the latest financial scandal to hit London, former policy maker Adam Posen has said.
Mr Posen, who served on the central bank's Monetary Policy Committee from 2009 to 2012, said BoE staff had had too much confidence that banks would regulate themselves and would root out bad behaviour by their own traders.
Adam Posen
Earlier this month the BoE suspended an official as part of an ongoing investigation into whether the central bank had turned a blind eye to the alleged rigging of exchange rates in London's $2.1 trillion-a-day currency market.
Mr Posen welcomed Ms Shafik's appointment, and the promotion of his MPC colleague, Ben Broadbent, to become deputy governor for monetary policy.
But he said that it would be more important to change a culture of too much trust in banks, which had also afflicted other central banks, including the US Federal Reserve.
"There has to be a top-down explicit statement that our bias is towards having market solutions, not cosy conversations with individual bankers, that the Bank of England is neither the friend nor the enemy of the banks," he said.
Mr Posen also criticised the forward guidance policy on interest rates that Mr Carney launched in August, calling it "irresponsible" for encouraging the public to focus on a single economic indicator - unemployment - as a guide to when interest rates would rise.
He welcomed a change to the policy last month, when the central bank said it would look at a wider range of data after unemployment fell to the 7pc threshold set in August.
Mr Posen, who now heads the Washington-based Peterson Institute for International Economics, also praised the open discussion at MPC meetings and joked that the biscuits served to policymakers were "cheap but fattening".
The markets are going to love you!
An Egyptian-born mother of twins who believes women are hindered by ‘a sticky door’ rather than a glass ceiling yesterday landed one of the biggest financial jobs in Britain.
Dr Nemat Shafik will become only the second female deputy governor of the Bank of England in August.
As well as helping to set interest rates, the Bank said Dr Shafik must also mastermind the ‘eventual exit’ from its £375 billion quantitative easing programme
Dr Nemat Shafik
It is the latest extraordinary twist in the meteoric career of a woman whose childhood experiences might have thwarted others’ ambitions.
She was born in Alexandria, Egypt but her family forced to flee at the age of four to escape General Nasser’s nationalisations of the 1960s.
Robbed of their possessions, they fled to America, and Dr Shafik has subsequently said the traumatic experience has left ‘a strong legacy’.
She said: ‘My father in particular, I think, never got over that, having lost everything.’
But her career has been spectacularly successful ever since, becoming the youngest-ever vice president of the World Bank at the age of just 35.
After leaving the World Bank, she moved to the Department for International Development, rising to become its permanent secretary between 2008 and 2011.
Since April 2011, she has been the deputy managing director of the International Monetary Fund.
Dr Shafik, who speaks English, Arabic and French, used to be married to the super-wealthy Mohamed El-Erian, the former chief executive of Pimco, the world’s largest bond house.
In 2002, she married Raffael Jovine, with whom she had the twins, and is also step-mother to his three daughters.
Dr Shafik, who is a national of Britain, America and Egypt
The British budget lowdown
George Osborne was accused of compounding the problems facing Britain’s “jilted generation” of young people after he unveiled a “silver savers’ Budget” aimed at winning the over-50s vote at next year’s general election.
The Chancellor’s big surprise was a sweeping shake-up of pensions and savings which will allow people to draw down all of their pension pot in cash when they retire, instead of having to buy an annuity to provide an annual income.
George Osborne
The limit for tax-free individual savings accounts (Isas) will be raised to £15,000 a year and pensioners will be able to buy new bonds with above-market interest rates.
What Mr Osborne hailed as “a Budget for the makers, doers and savers” was widely seen as an attempt to target the over-50s before next year’s general election. The “grey vote” is a key group because it turns out in much higher numbers than young people. It includes many natural Conservative supporters, some of whom have been attracted by the UK Independence Party.
The Chancellor regards the biggest reforms to pensions since 1921 as his second most important measure after his drive to balance the nation’s books. However, the small print reveals that the pensions changes will bring in £1.2bn to the Treasury by 2018-19 because people will pay income tax on the money they take out of their pension pots.
Insurance shares plunged by £3bn after the Budget, with leading annuities providers including Legal & General, Aviva, Standard Life and Prudential seeing sharp share price falls.
Mr Osborne could bask in a much better outlook for the economy. The Office for Budget Responsibility (OBR) revised its growth forecast for this year to 2.7 per cent, up from its 2.4 per cent figure in December. It predicted growth of 2.3 per cent next year and 2.6 per cent in 2016. The OBR revised down its borrowing figure for the current financial year from £111bn to £108bn, saying it would fall to £95bn next year and predicting a £5bn surplus by 2018-19.
The Chancellor said his spending cuts would have to continue after the election, adding: “The question for the British people is: who has the credibility to deliver them?” He tried to set a trap for Labour by imposing a £119bn cap on the welfare budget by 2015-16, covering all areas except the basic state pension and jobseeker’s allowance. But Labour said it would support the cap in a Commons vote next week.
Mr Osborne found room for some limited pre-election sweeteners – a 1p a pint cut in beer duty; freezing the duty on spirits and ordinary cider and halving bingo duty to 10 per cent. Business received help with energy bills, and new tax breaks and incentives to encourage companies to invest and export.
The Chancellor confirmed that the personal tax allowance would rise from £10,000 next month to £10,500 in April next year. As The Independent revealed on Saturday, he rejected growing calls from Conservative MPs to aid the middle classes by bringing in a higher than expected threshold for the 40p tax band. It will rise by 1 per cent, less than inflation, in each of the next two years – from £41,450 to £41,865 next month, and then to £42,285 next year, effectively dragging more people into the 40p band as their incomes rise.
The Liberal Democrats trumpeted the £10,500 personal tax allowance that Nick Clegg had demanded in November, going further than his £10,000 flagship policy at the 2010 election. In a Coalition trade-off, the Liberal Democrats approved Mr Osborne’s “savers’ package”, which was not their top priority.
Labour argued that the pensions and savings measures would provide most help to the rich and would not tackle the cost of living crisis. Ed Balls, the shadow Chancellor, welcomed moves to “empower” people to get a better deal on annuities amid low rates but warned that many could end up with a bad deal. “Will we have people disadvantaged or taken down the wrong road?” he asked. “Will we have people running out of money and forced to rely on the welfare state?” Mr Balls said the savings ratio, the proportion of people’s disposable income they save, would decline rather than rise.
Labour joined charities in highlighting a “generation gap” in the Budget. A Labour source said: “There was absolutely nothing to help young people, despite record unemployment. After this Budget, they are left even further behind.”
William Higham, Save the Children’s director of UK poverty, said: “The Budget was a missed opportunity to address the needs of families that are struggling to pay their food bill and children whose parents cannot afford to pay for uniforms and school trips.”
Osborne aides insisted that young people would benefit from the higher Isa limits; the rise in the personal allowance; an extension of the Help to Buy scheme and more apprenticeships. They denied that the savings shake-up would benefit the rich, saying that three-quarters of the five million people who currently saved up to their cash Isa limit were basic rate taxpayers.
Ros Altmann, a Downing Street pensions adviser under Tony Blair, said it was “a brilliant Budget for Tory election prospects.” Chris Sanger, the head of tax policy at Ernst & Young, said Mr Osborne’s “great granny giveaway” would “make saving for a pension much more attractive”.
But Nigel Green, the chief executive of the deVere financial advisory group, warned: “This policy of allowing a full drawdown [of pension pots] is extremely dangerous and ill-conceived for both individuals, who are considerably more likely to become financially dependent on the state, and the wider economy, which needs the population to be as financially independent as possible.”
Budget 2014: The key changes
* Level at which people start paying income tax to be increased to £10,500.
* Cash and shares Isas to be merged into single New Isa with £15,000 annual limit.
* All restrictions on access to pension pots to be removed, ending the requirement to buy an annuity.
* New Pensioner Bond available from January.
* Beer duty cut by 1p a pint while duty on spirits, whisky and ordinary cider is frozen. Tobacco duty to rise by 2 per cent above inflation.
* All long-haul flights to come under lower rate of Air Passenger Duty currently charged on flights to US.
* Help to Buy for new-build homes extended to 2020.
* Bingo duty halved to 10 per cent but duty on fixed-odds terminals rises to 25 per cent.
* Package to cut energy bills.
We shouldn't be too cosy and trusting with the banks.Thanks for stating the bleedin obvious
The Bank of England needs to abandon a culture of cosy chats and too much trust in banks following the latest financial scandal to hit London, former policy maker Adam Posen has said.
Mr Posen, who served on the central bank's Monetary Policy Committee from 2009 to 2012, said BoE staff had had too much confidence that banks would regulate themselves and would root out bad behaviour by their own traders.
Adam Posen
Earlier this month the BoE suspended an official as part of an ongoing investigation into whether the central bank had turned a blind eye to the alleged rigging of exchange rates in London's $2.1 trillion-a-day currency market.
Mr Posen welcomed Ms Shafik's appointment, and the promotion of his MPC colleague, Ben Broadbent, to become deputy governor for monetary policy.
But he said that it would be more important to change a culture of too much trust in banks, which had also afflicted other central banks, including the US Federal Reserve.
"There has to be a top-down explicit statement that our bias is towards having market solutions, not cosy conversations with individual bankers, that the Bank of England is neither the friend nor the enemy of the banks," he said.
Mr Posen also criticised the forward guidance policy on interest rates that Mr Carney launched in August, calling it "irresponsible" for encouraging the public to focus on a single economic indicator - unemployment - as a guide to when interest rates would rise.
He welcomed a change to the policy last month, when the central bank said it would look at a wider range of data after unemployment fell to the 7pc threshold set in August.
Mr Posen, who now heads the Washington-based Peterson Institute for International Economics, also praised the open discussion at MPC meetings and joked that the biscuits served to policymakers were "cheap but fattening".
We shouldn't be too cosy and trusting with the banks.Thanks for stating the bleedin obvious
The Bank of England needs to abandon a culture of cosy chats and too much trust in banks following the latest financial scandal to hit London, former policy maker Adam Posen has said.
Mr Posen, who served on the central bank's Monetary Policy Committee from 2009 to 2012, said BoE staff had had too much confidence that banks would regulate themselves and would root out bad behaviour by their own traders.
|
| Adam Posen |
Earlier this month the BoE suspended an official as part of an ongoing investigation into whether the central bank had turned a blind eye to the alleged rigging of exchange rates in London's $2.1 trillion-a-day currency market.
Mr Posen welcomed Ms Shafik's appointment, and the promotion of his MPC colleague, Ben Broadbent, to become deputy governor for monetary policy.
But he said that it would be more important to change a culture of too much trust in banks, which had also afflicted other central banks, including the US Federal Reserve.
"There has to be a top-down explicit statement that our bias is towards having market solutions, not cosy conversations with individual bankers, that the Bank of England is neither the friend nor the enemy of the banks," he said.
Mr Posen also criticised the forward guidance policy on interest rates that Mr Carney launched in August, calling it "irresponsible" for encouraging the public to focus on a single economic indicator - unemployment - as a guide to when interest rates would rise.
He welcomed a change to the policy last month, when the central bank said it would look at a wider range of data after unemployment fell to the 7pc threshold set in August.
Mr Posen, who now heads the Washington-based Peterson Institute for International Economics, also praised the open discussion at MPC meetings and joked that the biscuits served to policymakers were "cheap but fattening".
The markets are going to love you!
An Egyptian-born mother of twins who believes women are hindered by ‘a sticky door’ rather than a glass ceiling yesterday landed one of the biggest financial jobs in Britain.
Dr Nemat Shafik will become only the second female deputy governor of the Bank of England in August.
As well as helping to set interest rates, the Bank said Dr Shafik must also mastermind the ‘eventual exit’ from its £375 billion quantitative easing programme
|
| Dr Nemat Shafik |
It is the latest extraordinary twist in the meteoric career of a woman whose childhood experiences might have thwarted others’ ambitions.
She was born in Alexandria, Egypt but her family forced to flee at the age of four to escape General Nasser’s nationalisations of the 1960s.
Robbed of their possessions, they fled to America, and Dr Shafik has subsequently said the traumatic experience has left ‘a strong legacy’.
She said: ‘My father in particular, I think, never got over that, having lost everything.’
But her career has been spectacularly successful ever since, becoming the youngest-ever vice president of the World Bank at the age of just 35.
After leaving the World Bank, she moved to the Department for International Development, rising to become its permanent secretary between 2008 and 2011.
Since April 2011, she has been the deputy managing director of the International Monetary Fund.
Dr Shafik, who speaks English, Arabic and French, used to be married to the super-wealthy Mohamed El-Erian, the former chief executive of Pimco, the world’s largest bond house.
In 2002, she married Raffael Jovine, with whom she had the twins, and is also step-mother to his three daughters.
Dr Shafik, who is a national of Britain, America and Egypt
The British budget lowdown
George Osborne was accused of compounding the problems facing Britain’s “jilted generation” of young people after he unveiled a “silver savers’ Budget” aimed at winning the over-50s vote at next year’s general election.
The Chancellor’s big surprise was a sweeping shake-up of pensions and savings which will allow people to draw down all of their pension pot in cash when they retire, instead of having to buy an annuity to provide an annual income.
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| George Osborne |
The limit for tax-free individual savings accounts (Isas) will be raised to £15,000 a year and pensioners will be able to buy new bonds with above-market interest rates.
What Mr Osborne hailed as “a Budget for the makers, doers and savers” was widely seen as an attempt to target the over-50s before next year’s general election. The “grey vote” is a key group because it turns out in much higher numbers than young people. It includes many natural Conservative supporters, some of whom have been attracted by the UK Independence Party.
The Chancellor regards the biggest reforms to pensions since 1921 as his second most important measure after his drive to balance the nation’s books. However, the small print reveals that the pensions changes will bring in £1.2bn to the Treasury by 2018-19 because people will pay income tax on the money they take out of their pension pots.
Insurance shares plunged by £3bn after the Budget, with leading annuities providers including Legal & General, Aviva, Standard Life and Prudential seeing sharp share price falls.
Mr Osborne could bask in a much better outlook for the economy. The Office for Budget Responsibility (OBR) revised its growth forecast for this year to 2.7 per cent, up from its 2.4 per cent figure in December. It predicted growth of 2.3 per cent next year and 2.6 per cent in 2016. The OBR revised down its borrowing figure for the current financial year from £111bn to £108bn, saying it would fall to £95bn next year and predicting a £5bn surplus by 2018-19.
The Chancellor said his spending cuts would have to continue after the election, adding: “The question for the British people is: who has the credibility to deliver them?” He tried to set a trap for Labour by imposing a £119bn cap on the welfare budget by 2015-16, covering all areas except the basic state pension and jobseeker’s allowance. But Labour said it would support the cap in a Commons vote next week.
Mr Osborne found room for some limited pre-election sweeteners – a 1p a pint cut in beer duty; freezing the duty on spirits and ordinary cider and halving bingo duty to 10 per cent. Business received help with energy bills, and new tax breaks and incentives to encourage companies to invest and export.
The Chancellor confirmed that the personal tax allowance would rise from £10,000 next month to £10,500 in April next year. As The Independent revealed on Saturday, he rejected growing calls from Conservative MPs to aid the middle classes by bringing in a higher than expected threshold for the 40p tax band. It will rise by 1 per cent, less than inflation, in each of the next two years – from £41,450 to £41,865 next month, and then to £42,285 next year, effectively dragging more people into the 40p band as their incomes rise.
The Liberal Democrats trumpeted the £10,500 personal tax allowance that Nick Clegg had demanded in November, going further than his £10,000 flagship policy at the 2010 election. In a Coalition trade-off, the Liberal Democrats approved Mr Osborne’s “savers’ package”, which was not their top priority.
Labour argued that the pensions and savings measures would provide most help to the rich and would not tackle the cost of living crisis. Ed Balls, the shadow Chancellor, welcomed moves to “empower” people to get a better deal on annuities amid low rates but warned that many could end up with a bad deal. “Will we have people disadvantaged or taken down the wrong road?” he asked. “Will we have people running out of money and forced to rely on the welfare state?” Mr Balls said the savings ratio, the proportion of people’s disposable income they save, would decline rather than rise.
Labour joined charities in highlighting a “generation gap” in the Budget. A Labour source said: “There was absolutely nothing to help young people, despite record unemployment. After this Budget, they are left even further behind.”
William Higham, Save the Children’s director of UK poverty, said: “The Budget was a missed opportunity to address the needs of families that are struggling to pay their food bill and children whose parents cannot afford to pay for uniforms and school trips.”
Osborne aides insisted that young people would benefit from the higher Isa limits; the rise in the personal allowance; an extension of the Help to Buy scheme and more apprenticeships. They denied that the savings shake-up would benefit the rich, saying that three-quarters of the five million people who currently saved up to their cash Isa limit were basic rate taxpayers.
Ros Altmann, a Downing Street pensions adviser under Tony Blair, said it was “a brilliant Budget for Tory election prospects.” Chris Sanger, the head of tax policy at Ernst & Young, said Mr Osborne’s “great granny giveaway” would “make saving for a pension much more attractive”.
But Nigel Green, the chief executive of the deVere financial advisory group, warned: “This policy of allowing a full drawdown [of pension pots] is extremely dangerous and ill-conceived for both individuals, who are considerably more likely to become financially dependent on the state, and the wider economy, which needs the population to be as financially independent as possible.”
Budget 2014: The key changes
* Level at which people start paying income tax to be increased to £10,500.
* Cash and shares Isas to be merged into single New Isa with £15,000 annual limit.
* All restrictions on access to pension pots to be removed, ending the requirement to buy an annuity.
* New Pensioner Bond available from January.
* Beer duty cut by 1p a pint while duty on spirits, whisky and ordinary cider is frozen. Tobacco duty to rise by 2 per cent above inflation.
* All long-haul flights to come under lower rate of Air Passenger Duty currently charged on flights to US.
* Help to Buy for new-build homes extended to 2020.
* Bingo duty halved to 10 per cent but duty on fixed-odds terminals rises to 25 per cent.
* Package to cut energy bills.
Interest rate set to rise to 3% as OECD says Brits going to grow
Interest rates will soar to 3% by 2017, as Britain’s economic recovery begins to fully gather momentum, the Bank of England governor Mark Carney has identified.
Carney estimated that rates would soar up from their current historically low value of 0.5% in the next three years, forecasting that they could eventually reach as high as 3% at the end of 2017.
Mr Carney’s comments are thought to be a direct response to an announcement made by the Organisation for Economic Co-operation and Development, who this week identified the UK as the country with the quickest growing economy in the western world.
The OECD estimated that Britain’s economy would grow by an astonishing 3.3% during the first 6 months this year, taking its growth rate past any G7 country at present.
The governor had previously refused to buckle under intense pressure to raise interest rates prematurely, citing that the country’s economic recovery thus far has been ‘unsustainable’. He argued that other factors such as labour productivity and real wages had to pick up before he would begin to raise rates, and outlined that he would attach the speed in which he would implement hikes to the country’s overall economic performance in the future.
However, the OECD’s forecasts have likely given him the assurance he has been looking for on the country’s economic recovery, though he has still maintained a cautious stance and identified that he will only adopt a reactionary approach when it comes to raising rates in the future.
“When the time comes, a welcome time to raise rates, we expect it to be gradual, and the degree to be limited,” he said.
- See more at: http://www.moneyexpert.com/news/interest-will-rise-3-2017-says-bank-england-governor-carney/800582699#sthash.SDBBmqSu.dpuf
A strong pound could lead to low rates for longer
The Bank of England could keep interest rates lower for longer if sterling strengthens much more, the Bank deputy governor Charlie Bean said on Monday, in a rare comment by the central bank on the level of the pound.
Bean said that sterling's current level was "fine", but that Britain would find it harder to enjoy a solid export-based recovery if the currency strengthened any more.
He also cautioned against getting "too hung up" about exactly when the central bank will raise interest rates from their record low 0.5 percent, after financial markets and other policymakers pointed to spring 2015 as a possibility.
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| Charlie Bean |
In a speech to local businesses in Darlington, north east England, Bean said there were clear signs Britain's economy was on the mend, but that it was "early days" and the trade deficit needed to narrow to put growth on a more solid footing.
"Any further appreciation of sterling, which has risen almost 10 percent in trade-weighted terms since March, would not be particularly helpful in terms of facilitating a rebalancing towards net exports," Bean said.
In a question and answer session after his speech, he said a stronger sterling would could reduce inflation because of weaker import prices.
"We would be more likely to undershoot the inflation target in the medium term, and that would mean we would need to keep policy looser for longer than would otherwise be the case."
Last month Ian McCafferty, who sits alongside Bean on the BoE's rate-setting Monetary Policy Committee, also said further sterling strength would be a worry and could potentially make the bank delay raising interest rates.
Bean said British exports had been somewhat disappointing - especially in the services sector - although he said there were some more positive stories of businesses bringing back activities that had previously moved offshore.
Bean also warned against pinpointing spring 2015 as the date when the Bank would raise interest rates.
"(The) market curve implies a first rise in Bank Rate in the spring of 2015, though I should stress that we are likely to learn a lot between now and then about the pace of the recovery, the amount of slack and the evolution of supply, and the impact on costs and prices," he said.
"So I would counsel against getting too hung up about the precise date at which Bank Rate first rises."
McCafferty and fellow MPC member Martin Weale had both cited spring 2015 as a possibility for the first rate hike in recent interviews.
Bean said that when the Bank does raise interest rates it will do so gradually, and that rates are likely to remain below their pre-crisis average of around 5 percent "for some time" - perhaps around 2-3 percent, echoing the new forward guidance given by Governor Mark Carney last month.
But Bean did not go quite as far as MPC member David Miles, who last month suggested the "new normal" for monetary policy would be interest rates averaging below pre-crisis levels.
Bean said it was possible the Bank might not sell back all of the 375 billion pounds ($627 billion) of gilts which it bought under its quantitative easing stimulus scheme. Because banks might want to park more reserves at the Bank due to tighter regulation after the financial crisis, the Bank might need to hold more gilts as a counterparty.
"We may not be in a position to sell all of the gilts back, and some of them will of course roll over naturally," Bean said. The Bank has said it will reinvest the proceeds of maturing gilts while interest rates remain at 0.5 percent, but has not said what it will do after that.
MPC member David Miles also made the point in a speech last month that the Bank might need to hold on to government bonds as collateral for banks' reserves.
Bean said that although Britain's economic recovery has so far been driven by household consumption and housing market activity, there were reasonable grounds to believe business investment would take over as a major driver for the recovery.
He also said there was more scope for housing investment to continue driving growth, although perhaps only a little room for the household savings ratio to drop further as consumers save less as a proportion of their income.
The BoE's Financial Policy Committee was keeping a "beady eye" on the housing market, he added.
"(There) is a risk that increased demand for housing ends up mainly in higher house prices rather than more houses. If associated with excessive expansion in mortgage lending, that may create future financial stability risks."
"It is not a piece of cake. It is going to be hard work."-Merkel in Britain
Following a Downing Street meeting with Prime Minister David Cameron, Angela Merkel said both countries could bring in laws to restrict benefit tourism, as part of "overall European cooperation".
Mr Cameron said changes to the EU were "possible, achievable and doable".
Mrs Merkel addressed Parliament earlier what the full video https://www.youtube.com/watch?v=lmusV-7BMzM
- and later had tea with the Queen.
She also had a meeting with Mr Cameron in Downing Street, with a picture being released of the two of them chatting on the sofa in the Camerons' flat.
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| David Cameron and Angela Merkel |
Mr Cameron is keen to negotiate changes to the UK's treaties with the EU ahead of a promised referendum on whether the country should remain in the organisation, which he wants to hold before the end of 2017.
He regards Mrs Merkel as a key figure in achieving his aim and has organised several events to welcome the German leader during her one-day visit to London, including tea with the Queen at Buckingham Palace.
At the Downing Street press conference, Mr Cameron said he and Mrs Merkel "both want to see changes in Europe".
He added that EU rules on freedom of movement needed to change to ensure people could not move from country to country to sign up for welfare payments.
Angela Merkel addressed both Houses of Parliament during her one-day visit
Mrs Merkel said the UK and Germany could pass laws to limit this problem, saying: "Where there's a will, there's a way."
She said freedom of movement was intended to allow people to work in different countries, not "having immigration into social systems".
However, speaking of changing the EU, she said: "It is not a piece of cake. It is going to be hard work."
Mrs Merkel told assembled political and business leaders: "Some expect my speech to pave the way for a fundamental reform of the European architecture which will satisfy all kinds of alleged or actual British wishes. I am afraid they are in for a disappointment.
"Others are expecting the exact opposite and they are hoping that I will deliver the clear and simple message here in London that the rest of Europe is not prepared to pay almost any price to keep Britain in the European Union. I am afraid these hopes will be dashed."'
Mrs Merkel hailed the peace and stability she said the European Union had brought, saying war between EU member states was now "inconceivable".
Mrs Merkel's speech was well received by the UK parliamentarians
She praised the "unparalleled success" of the EU free market - and the freedoms she said European integration had delivered - but stressed that "we need to change the political shape of the EU in keeping with the times".
She told the UK's gathered political leaders the SU had to become stronger, saying: "In order to attain this goal we need a strong United Kingdom with a strong voice inside the European Union.
"If we have that, we will be able to make the necessary changes for the benefit of all."
The Guardian reported on Wednesday that Berlin was prepared to offer "limited opt-outs" to the UK over its future compliance with existing EU directives and to make sure some other regulations were more flexibly enforced.
The newspaper said it was a sign of the lengths that Germany was willing to go to to ensure the UK remained a member of the EU amid fears in Europe that a referendum could lead to British withdrawal.
But BBC Berlin Correspondent Stephen Evans said sources close to Mrs Merkel were playing down expectations of new proposals for the kind of changes British Conservatives wanted to see.
Although not an official state visit - Mrs Merkel is not head of state - the trip has been planned for months, with both governments aware of its political significance at a time of looming change in Europe.
Mr Cameron has said that if the Conservatives win the 2015 election, he will seek to renegotiate the terms of the UK's membership of the European Union and put the outcome to an in-out referendum of the British people in 2017.
But he faces a battle to convince leaders of other EU member states to agree to the treaty changes he will need, with French President Francois Hollande recently telling the prime minister, on a one-day visit to the UK, that it was "not a priority".
The leader of Mr Cameron's junior coalition partners, the Liberal Democrat Deputy Prime Minister Nick Clegg, and opposition leader Ed Miliband, who both oppose calls for a referendum and who have warned that Conservative calls for a root-and-branch renegotiation will alienate EU leaders, also held separate meetings with Mrs Merkel.
Everyone knew about Libor
Newly-released minutes of the meeting of the Fed’s Open Market Committee confirm that the Fed knew about the Libor interest rate manipulation.
Bloomberg reported earlier this month:
"Bank of England officials told currency traders it wasn't improper to share impending customer orders with counterparts at other firms, a practice at the heart of a widening probe into alleged market manipulation, according to a person who has seen notes turned over to regulators
Traders representing some of the world’s biggest banks told officials at the meeting that they shared information about aggregate orders before currency benchmarks were set, three people with knowledge of the discussion said. The officials said there wasn't a policy on such communications and that banks should make their own rules, according to the people."
The Libor interest rate scandal was the biggest financial scandal in world history:
The big banks have conspired for years to rig interest rates … upon which $800 trillion in assets are pegged
This was the largest insider trading scandal ever and the largest financial scam in world history
Even though RBS and a handful of other banks have been fined for interest rate manipulation, Libor is still being manipulated. No wonder … the fines are pocket change – the cost of doing business – for the big banks
Interest rates in Britain could go up faster than you think
Interest rates are on course to rise next Spring and could be raised sooner if there are signs that falling unemployment is causing inflationary pressures, according to a Bank of England policymaker.
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| Martin Weale |
Martin Weale, an external member of the Monetary Policy Committee (MPC), said the Bank could raise rates before next May's General Election.
"I think it is very helpful if we try and explain that the most likely path for interest rates is that the first rise will come perhaps in the spring of next year," he told Sky News. "During an election campaign it would obviously be difficult [to raise rates] but the election campaign will last for three weeks."
Mark Carney, the Bank's Governor, has stressed that the MPC is in no rush to raise rates, and that any increases would be gradual. The Bank severed the link between the unemployment rate and an interest rate hike last week, switching to a broad range of measures including wage growth and business investment to assess Britain’s ability to support a rise.
Ireland and UK first joint trade mission !
Ireland and the UK will undertake their first ever joint trade mission at the Singapore Airshow - Asia's largest airshow.
The trade mission is part of a programme of cooperation to strengthen relations over the next decade led by UK prime minister David Cameron and Irish Taoiseach Enda Kenny.
It is being headed up by Ireland's jobs minister Richard Bruton, UK transport minister Stephen Hammond and Northern Ireland enterprise minister Arlene Foster with support from UK Trade & Investment (UKTI),Enterprise Ireland and Invest Northern Ireland.
Bruton said the mission was an important part of a “wider programme of cooperation between Ireland and the UK”.
"The aerospace industry is one of Ireland's most valuable and technically advanced industries. Today, Ireland is recognised as a leading location for aviation, MRO, technology, engineering and aviation finance.
"This first joint mission has attracted an impressive list of companies from Ireland, Northern Ireland and the UK that will demonstrate our considerable combined strengths in the aerospace sector at Asia's largest air show."
Ireland and the UK will undertake their first ever joint trade mission at the Singapore Airshow - Asia's largest airshow.
The trade mission is part of a programme of cooperation to strengthen relations over the next decade led by UK prime minister David Cameron and Irish Taoiseach Enda Kenny.It is being headed up by Ireland's jobs minister Richard Bruton, UK transport minister Stephen Hammond and Northern Ireland enterprise minister Arlene Foster with support from UK Trade & Investment (UKTI),Enterprise Ireland and Invest Northern Ireland.
Bruton said the mission was an important part of a “wider programme of cooperation between Ireland and the UK”.
"The aerospace industry is one of Ireland's most valuable and technically advanced industries. Today, Ireland is recognised as a leading location for aviation, MRO, technology, engineering and aviation finance.
"This first joint mission has attracted an impressive list of companies from Ireland, Northern Ireland and the UK that will demonstrate our considerable combined strengths in the aerospace sector at Asia's largest air show."
UK manufacturing improving and demand up
The UK manufacturing sector made a positive start to 2014.
Rates of expansion in output and new orders remained well above their respective long-run trends, supporting a solid increase in payroll numbers.
The seasonally adjusted Markit/CIPS purchasing manager’s index (PMI) posted 56.7 in January, down from December’s 57.2.
Although the PMI currently stands at its lowest level in three months, it is still well above the series average of 51.3. The headline index has signalled an improvement in operating conditions in each of the past ten months.
The strong upturn in manufacturing production was maintained in January, as companies scaled up output in response to stronger inflows of new orders. There were reports of improved demand from the domestic market and rising levels of new business from overseas.
The latest expansion in new export orders was broad-based by source, with UK manufacturers mentioning improved demand from North America, mainland Europe, Asia, Brazil, Scandinavia and the Middle-East.
The ongoing rebound in the sector led to further job creation at the start of the year.
The UK manufacturing sector made a positive start to 2014.
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