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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden and Angela Monaghan

Pound jumps as Mark Carney says rate hike debate is building - as it happened

Mark Carney, Bank of England governor
Mark Carney, Bank of England governor Photograph: Will Oliver/EPA

PS: Here’s economics editor Larry Elliott’s take:

The pound is sticking firmly to its gains, up 1.2 cents or 1% at $1.294, after Mark Carney hinted that he might support an interest rate rise.

Governor Carney’s hint that the Bank could withdraw some of its stimulus package if UK wages pick up, and business investment strengthens, is the talk of the City tonight.

So let’s give the last word to IG’s Chris Beauchamp,

Mark Carney, everyone’s favourite dovish BoE governor, suddenly declared that the bank might need to raise rates. As a result, the pound surged above $1.29 for the first time since its election night drubbing, and this prompted the FTSE 100 to drop back to the lows of the day.

And that’s all for today. Thanks for reading and commenting! GW and AM

FTSE 100 dragged down by strong pound

The jump in sterling has hit the share prices of multinational firms on the London stock market.

Fashion chain Burberry led the FTSE 100 fallers at the close of trading, shedding 3.4%, followed by pharmaceuticals firm Shire, which lose 2.5%.

A stronger pound makes exporters a little less competitive, and also erodes the value of their overseas earnings.

European stock markets had a better day, after European Central Bank sources went on maneuvers to crush talk that it might unwind its stimulus soon. That send the euro down from its one-year high against the dollar.

European stock markets tonight
European stock markets tonight Photograph: Thomson Reuters

Marchel Alexandrovich, senior European economist at Jefferies International, says the central banks have confused the markets in recent days.

Mario Draghi’s speech yesterday, and the ‘correction’ which followed from ECB officials today, received the most attention, but it was arguably the BoE Chief Economist Andy Haldane’s speech the week before – which touched on many of the same themes and effectively reached the same conclusion – that is a better guide to how central bank thinking continues to evolve.

The BoE remains puzzled as to why wage growth had consistently disappointed expectations despite robustness in employment growth (even though there are a number of plausible contributing factors in play). However, and this is perhaps the key take away, the BoE does not consider a change in the relationship between unemployment and wage growth (a flattening of the Phillips curve) the same thing as a breakdown of this relationship altogether. Indeed, if/when that relationship reasserts itself, the snap-back in wage growth could lead an overshoot of the inflation.

Updated

The markets have got carried away with Mark Carney’s speech, argues Ranko Berich, head of market analysis at Monex Europe.

He reckons that Carney was describing the challenge facing the MPC, rather than hinting at a policy shift.

“We already know there is robust debate within the MPC on the merits of ultra-low rates, and today’s speech confirms that Carney himself is not ideologically attached to either side of the argument, hawkish or otherwise.

As Carney said, once again in very plain terms, the MPC is looking to balance the current inflation overshoot against the cost of containing it through tighter monetary policy. The amount of spare capacity in the economy – a difficult thing to measure even for the BoE – is crucial for this decision, as is the outlook for how quickly growth will erode this slack.

Thanks to Mark Carney’s comments, the pound has now racked up six days of gains against the US dollar.

Today’s rally is the strongest move since Theresa May called the general election two months ago.

Updated

Howard Archer, chief economic advisor to the EY ITEM Club, reckons that Mark Carney isn’t actually in a rush to raise interest rates.

He suspects that the Bank of England wants to wait until we have a clearer picture of how Brexit will play out.

Archer writes:

“At first glance, the latest remarks from the Bank of England Governor come across as less dovish than his Mansion House speech which gave the impression that he is in no hurry to raise interest rates. The markets have also interpreted the Governor’s latest remarks as less dovish with sterling immediately spiking up following the speech.

“The Governor indicated that the inflation overshoot can only be tolerated by the Bank of England for so long. He indicated that some removal of monetary expansion is likely to become necessary if spare capacity continues to be eroded.

“However, the Governor reiterated his view that it is currently best to leave monetary policy unchanged as it is too early to judge the extent and likely persistence of the UK economic slowdown, while domestic inflationary pressures are still subdued, notably wage growth and unit labour costs.

“For the time being, the Governor still looks to be in ‘wait and see’ mode on interest rates. He is likely to want to see how much other elements of demand, including business investment, offset weaker consumer spending over the coming months, and whether wages and unit costs start to firm up. The Governor may also want to see how the economy reacts as Brexit negotiations develop, and how the negotiations unfold.

Mark Carney’s comments are the clearest signal yet that the Bank of England is “minded to tighten” monetary policy, says Neil Wilson of ETX Capital.

But they come just hours after deputy governor Jon Cunliffe argued that there was no rush to unwind last autumn’s rate cut, to just 0.25%.

So there’s quite a lot of head-scratching going on.

Wilson says:

There does appear to be a decided tilt towards a tightening bias, should economic conditions improve. It’s a case of justifying why they shouldn’t tighten rather than why they should, which appears to be a material shift from first few months of the year.

But the picture is now pretty muddy. Only last week Mr Carney said ‘now is not the time’ to tighten. Deputy governor John Cunliffe said only today that there is no rush to raise rates. So we are left guessing – the MPC does not seem to know where it’s at and the debate is taking place in public. This ought to play out in more vote splits over the summer before a move to ‘correct’ its policy mis-step perhaps by the autumn, assuming economic growth and wage growth holds.”

Here’s more reaction, from Philip Shaw of Investec...

Economics blogger Jerome Blokland points out that UK government bond yields have jumped too:

This chart shows how the pound bounced as Carney’s comments hit the wires.

The FT’s Chris Giles agrees that Mark Carney’s comments are significant.

He writes:

Mark Carney sought to clarify his position on interest rates on Wednesday, setting out his view that he would vote to tighten monetary policy if business investment begins to rise offsetting weaker consumption.

The Bank of England governor has come under pressure to say when he would vote for an increase, having previously said it was “not yet the time” for higher rates and after the close June 5 to 3 vote to keep rates on hold.

His views are important on the committee because he has never voted with the minority on the MPC, unlike his predecessor, since coming to the bank in 2013.

Speaking at a European Central Bank forum in Sintra, Portugal, Mr Carney reiterated the common view on the MPC that any overshoot of inflation compared with the BoE’s 2 per cent targets “can only be temporary in nature and limited in scope”.

Connor Campbell, analyst at Spreadex, says Carney’s comments prompted a “serious shift” in currency markets but traders failed to focus on the detail of what he said...

A caveat-laden statement from Mark Carney – speaking at the ECB Forum in Portugal – caused a super-surge from sterling.

Investors were uninterested in the nuances of what Carney was actually saying, focusing on the fact that the BoE chief said ‘some removal of monetary stimulus is likely to become necessary’ but ignoring that the central banker made it clear A LOT of things, like UK wage growth and business investment (not to mention Brexit), need to move in the right direction for that to happen.

Here’s some innovative reaction to Mark Carney’s unexpected hint that the Bank of England could raise interest rates in the coming months....

Carney says that globally, there are signs of a pickup in investment, which should in turn support productivity growth, stronger wages and higher welfare for all.

But in the UK, not so much:

Globally, there are signs that such a rotation may be beginning. Although some UK–specific uncertainties might limit the UK’s participation in that pickup, the Bank of England will make its contribution by pursuing determined policies within well-established frameworks in order to maintain monetary and financial stability.

He points out some of the specific challenges facing the UK (BREXIT):

The main issues facing UK companies are uncertainties – about how consumers will adjust to a period of weaker real income growth; about market access post-Brexit; about the potential risks in the transition to new arrangements with the EU and the rest of the world.

Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU. But it can influence how this hit to incomes is distributed between job losses and price rises. And it can support households and businesses as they adjust to such profound change.

Carney says that while the most productive UK companies have continued to innovate, others have been slower to adopt these innovations.

That has stalled diffusion of productivity gains through the economy. This shortfall in investment could reflect deeper causes such as inadequate competition, barriers to investment in knowledge-based capital and sub-optimal managerial practices.

Carney: removal of monetary stimulus could become necessary

Bank of England governor Mark Carney is appearing on a panel in Sintra, Portugal, at the European Central Bank’s annual forum.

The pound jumped more than half a cent against the dollar, to $1.2915, after the Bank published his remarks:

When the MPC last met earlier this month, my view was that given the mixed signals on consumer spending and business investment, it was too early to judge with confidence how large and persistent the slowdown in growth would prove. Moreover, with domestic inflationary pressures, particularly wages and unit labour costs, still subdued, it was appropriate to leave the policy stance unchanged at that time.

Some removal of monetary stimulus is likely to become necessary if the trade-off facing the MPC continues to lessen and the policy decision accordingly becomes more conventional.

The extent to which the trade-off moves in that direction will depend on the extent to which weaker consumption growth is offset by other components of demand including business investment, whether wages and unit labour costs begin to firm, and more generally, how the economy reacts to both tighter financial conditions and the reality of Brexit negotiations. These are some of the issues that the MPC will debate in the coming months.

Euro slides as ECB sources get to work

Ha! The European Central Bank have been quietly briefing that investors got the wrong end of the stick about Mario Draghi’s speech yesterday.

It’s an attempt to calm speculation that the ECB might tighten monetary policy soon.

Reuters have the details:

European Central Bank President Mario Draghi intended to signal tolerance for a period of weaker inflation, not an imminent policy tightening, when his comments sent the euro higher this week, sources familiar with Draghi’s thinking said.

The ECB declined to comment.

But the markets don’t need an official ECB quote... they’ve already sold the euro, sending it down sharply....

You’d almost think that the ECB weren’t happy to see the euro at a one-year high against the US dollar.....

Those ECB sources do have a point, though -- yesterday, Draghi spoke about the need for “persistence and prudence”, but traders mainly focused on his upbeat assessment of the eurozone economy, and hints that it might adjust its stimulus programme.

Lunchtime summary

Time for a quick recap

The split at the Bank of England over when to start raising interest rates has deepened, after deputy governor Sir Jon Cunliffe declared his hand. Cunliffe is firmly in the ‘not yet’ camp, putting him alongside boss Mark Carney, but in opposition to at least two other policymakers.

City economists are expecting some tense meeting at the Bank of England in the months ahead, as the central bank tries to juggle high inflation and slowing consumer spending.

Marc Ostwald of ADM Investor Services says:

The Bank of England is clearly very divided, with deputy governor Cunliffe this morning sending rather mixed signals, ostensibly backing Carney by saying this was not the time to raise interest rates, but also noting “(We) do have to look at what’s happening to domestic inflation pressure, and I think that on the data we have at the moment, gives us a bit of time to see how this evolves” - ‘a bit of time’ being the key observation.

UK house prices have reversed three months of falls, by rising 1.1% in June. Housing experts say that a lack of supply is supporting prices (Britain’s record low interest rates must be helping, too!)

However, price rises in London have slowed to the lowest rate since 2012.

It’s been a bad morning for Tesco workers; one in four of its head office staff are being axed under a cost-cutting drive.

Britain’s Co-operative Group will be left with just a 1% stake in the Co-op Bank after a deal was clinched with hedge funds and other investors to pump £700m into the loss-making lender.

In the markets, the euro has hit a one-year high against the US dollar following confident noises from the European Central Bank this week.

Some experts, though, think the markets have got carried away - and that Mario Draghi wasn’t as hawkish as reported.

The FTSE 100 is failing to provide any drama, though; it’s currently up one solitary point at 7436.

Meanwhile, in what amounts to the first public sign that light is finally at the end of the seemingly never-ending Greek crisis tunnel, creditors have announced that the country could tap international capital markets by the end of the year.

Helena Smith reports

“Greece is entering the final year of the program with a real opportunity to regain market access and actually end the program on schedule in August next year,” the EU Commission’s Greek mission chief Declan Costello told a conference outside Athens.

But there were also warnings:

Nicola Giammarioli, who is Greece mission chief for the euro zone’s rescue fund, the European Stability Mechanism, cautioned that reforms weren’t enough. After legislating them, Athens had to implement them, she said.

“We are half-way. We have a good framework for (non-performing loan) management. Now its time for NPLs [non-performing loans] to be reduced. Greece has created an independent tax authority. Now it’s time to collect taxes … A privatisation and asset fund has been set up.

Now it’s time to privatize and generate value.”

Greek bonds have already been rallying recently, on hopes that the country could return to the financial markets. Earlier this week its benchmark 10-year debt hit its highest levels since the debt crisis began.

Updated

Greek businesses create a stink over rubbish workers' strike

Athens yesterday
Athens yesterday Photograph: Milos Bicanski/Getty Images

Ouch! Over in a sweltering Athens it’s not only the temperature that is rising.

Greek businessmen are now sounding the alarm after striking refuse workers decided to continue their walkout last night.

With rubbish continuing to pile up at an alarming rate on the sweltering streets, will Greece’s tourist industry take a hit?

Helena Smith reports from the Greek capital

With mounds of rubbish now turning into mountains of rubbish across the capital, the Athens Chamber of Tradesman has waded in with an appeal to all sides to make the concessions needed to end the strike.

The 11-day walk-out was prolonged last night after municipal workers rejected prime minister Alexis Tsipras’ proposed compromise of improved work conditions, including permanent jobs and thousands of new hirings, as insufficient.

In a sharply-worded statement the Chamber warned of the growing risk of the rubbish becoming a public health “bomb” and accused strikers of holding millions of citizens, tourists and tradesman hostage to their demands.

“The images are disheartening. The tons of rubbish now on the roads conjure a third world country, definitely not a European Union state. Tourists, who have chosen Greece as their holiday destination, walk amid mountains of rubbish while the combination of the heat wave and rubbish is a direct threat to public health.

The economic damage for thousands of professional restaurateurs and tourist enterprises is huge.”

A street in Athens.
A street in Athens. Photograph: Milos Bicanski/Getty Images

Athens mayor Giorgos Kaminis has also intervened calling the unionists’ demands “excessive” and saying a government amendment legislating labour reforms more than met what they had been hoping for.

With debt-stricken Greece dependent on international bailout funds, Tsipras told unionists he could not openly defy creditors who have demanded strict streamlining of government-controlled bodies.

The striking workers have vowed to continue the strike until Thursday when rallies are also expected. In northern Thessaloniki, Greece’s second biggest city, local authorities announced that they would outsource garbage collection to the private sector.

“We have documents from the department of health and Kelpno (the Hellenic centre for disease control and prevention) saying that there is a serious danger for public health. Today we will start spraying,” said Thomas Psarras in charge of public cleanliness for the municipality.

Temperatures are expected to rise to 43 degrees Celsius by Friday as Greece swlters under its first summer heatwave.

Greek journalist Omaira Gill reports that life goes on, but the situation is hardly ideal:

In the last few minutes, there is now chatter that the government could forcibly mobilising municipal workers to collect rubbish.

Spokesman Dimitris Tzanakopoulos has just ruled out but said while “the government will not allow the endangering of public health,” it won’t agree to “private interests” replacing the strikers.

Updated

Here’s some speedy reaction to Tesco’s job cuts plans, from Hannah Maundrell, Editor in Chief of money.co.uk :

“It’s sad but not surprising that Tesco are making job cuts at its head office. Last week Tesco said they needed to remain “sustainable and cost effective” and this is evidently their way of streamlining the business.

“It’s undoubtedly distressing news for employees of Tesco and their families. Now is the time to check what redundancy rights you have and dig out any income or mortgage protection policies you hold just in case.

“It’s also worth checking what support from the government you’d be entitled to if you’ve been left out of work and do a bit of an overhaul of your finances so you know how your budget will cope if you’re faced with a temporary gap in employment.”

Money.co.uk have also published this guide to redundancy rights in the UK.

Here’s our story on the job cuts:

Tesco cuts 1,200 head office jobs

Another newsflash: Tesco is reportedly axing 1,200 jobs at its head office.

That’s a big blow to the supermarket chain’s workforce, as bosses press on with efforts to cut costs.

This means that one in four staff at Tesco’s offices at Welwyn Garden City and Hatfield would go, according to the Press Association.

This comes hot on the heels of the planned closure of Tesco’s Cardiff call centre, which could eliminate 1,100 jobs.

Co-op rescue deal finally agreed.

Newsflash: At long last, Britain’s troubled Co-operative Bank has finally agreed a capital raising plan.

After months of negotiations, Co-Op Bank will receive £700m of fresh capital, and the Co-operative Group’s stake the company will fall to just 1%.

My colleague Jill Treanor has the details:

A rescue deal for the Co-operative Bank has been clinched under which hedge funds and other investors will pump £700m into the loss-making operation.

The capital injection by means that the bank, which has 4m customers, will continue as a standalone entity after it abandoned efforts to find a buyer.

However, the structure of deal means that the Co-operative Group of supermarkets and funeral homes that used to own the bank will be left with a 1% stake in the bank. The mutual’s stake had already fallen to 20% after previous rescue operations, the first of which was in 2013 when the scale of the problems in the bank were uncovered, and it refused to put more money in this time.

The bank - which put itself up for sale in February - said that despite the tiny stake owed by the Group, its “name, brand and commitment to co-operative values, set out in its ethical policy, will continue unaffected”.

Dennis Holt, chairman said: “The board is pleased to confirm this proposal for a recapitalisation which will mean that the Co-operative Bank can continue as a viable stand-alone entity, with values and ethics at its heart. It is a great outcome for our customers. Our investors share our commitment to building our distinctive ethical franchise and see strong future growth potential for The Co-operative Bank.”

The deal follows a failed attempt to sell Co-op Bank, which has suffered years of losses and ran up a £1.5bn capital blackhole following a flawed merger with Britannia Building Society in 2009.









Euro hits one-year high as Deutsche tears up its forecasts

Deutsche Bank’s foreign exchange strategist have been forced into a screeching u-turn this morning.

They have abandoned their forecast that the euro would end the year close to parity with the US dollar, at just $1.03. They now expect it to have strengthened to $1.16 by the end of 2017.

Deutsche threw in the towel after hearing ECB president Mario Draghi give an optimistic assessment of the eurozone yesterday, saying that growth was broadening amid moew reflationary pressures.

The bank says:

We are completely revising our euro outlook for the rest of the year. The speech is not the fundamental driver behind the change in view, but it aptly marks the culmination of a number of developments that have caused us to change our forecasts.

Arguably Deutsche are a little late to the non-parity party; the euro has been climbing steadily against the US dollar this year, and indeed hit a one-year high of $1.136 this morning.

The euro vs the US dollar over the last two years (higher = stronger euro).
The euro vs the US dollar over the last two years (higher = stronger euro). Photograph: Thomson Reuters

Jamie McGeever of Reuters tweets:

Sir Jon Cunliffe’s reluctance to vote for an early interest rate rise is keeping the pound at its highest level against the US dollar since the general election.

Sterling jumped over $1.283 this morning, it highest point since the shock exit polls showed Britain had voted for a hung parliament.

The pound vs the US dollar
The pound vs the US dollar Photograph: Thomson Reuters

There’s not much other drama in the City, though. Distribution firm Bunzl is the biggest riser on the FTSE 100, up almost 4%, but the wider FSTE 100 is now flat.

Joshua Mahony, market analyst at IG, says:

The FTSE has been moving lower once more this morning, with a dovish comment from BoE deputy governor Jon Cunliffe helping recover much of the initial selling at the open

The news that UK house prices rose by 1.1% this month (but not in London!) has caused plenty of chatter in the City.

Caroline Simmons, Deputy Head of the UK Investment Office at UBS Wealth Management, predicts that prices will only rise modestly over the next year.

“Whilst house price growth bounced back in June the figures still point to a slowing picture overall with annual house price growth now at just 3%. Going forward, recent political uncertainty from Theresa May’s minority government and Brexit negotiations is likely to weigh on consumer confidence, denting UK house sales in the near term. There was a notable decline in new buyer enquiries following the General Election, which we expect to persist over the short term.

“Over the medium-term the picture looks slightly rosier. Structural demand remains supportive given household formation rates and credit conditions remain supportive for house prices. The banks’ increased capital strength and ability to lend, alongside persistently low interest rates aiding home owners’ ability to service mortgages, should continue to support house price growth.

“We are forecasting 2-3% house price growth over the next 12 months.

This chart from Nationwide shows how London is now the second-slowest region for house price growth:

Nationwide house price figures

Watchdog gets its teeth into UK investment industry

In other news, Britain’s investment industry has been ordered to clean up its game and bring in radical reforms to help savers.

The City regulator, the FCA, is demanding that fund managers overhaul their charging structures and improve governance standards, to restore confidence in the sector and give customers a better deal.

My colleague Angela Monaghan explains:

To improve competition, the regulator said companies should charge a single “all-in fee”, and make costs and charges more consistent and transparent for investors.

Other measures included a requirement for fund managers to appoint a minimum of two independent directors to their boards.

The FCA is also launching a separate investigation of investment platforms. That news hit Hargreaves Lansdown, the UK’s largest platform for investing in funds; its shares have fallen by 2.5% to the bottom of the FTSE 100 leaderboard this morning.

Martin Gilbert, chief executive of Aberdeen Asset Management, has publicly backed the FSA, saying investors deserve better governance and transparent fees.

“I have stated several times that I am in favour of all-in fees including all costs as the industry has an obligation to deliver what the customer wants. Incorporating dealing charges for equity funds should be straightforward particularly for those managers, like ourselves, who have low portfolio turnover.

It is more challenging to calculate all-in-fees for bond funds, but I’m encouraged the industry is already looking at ways of doing this. We need to embrace the concept and commit to finding a solution for the best interests of clients.

Here’s a more pithy reaction:

Updated

Hawks vs Doves at the Bank of England

The Bank of England’s next interest rate decision is scheduled for August 3rd.

This will be an exciting vote, but I don’t think there’s enough support for an interest rate hike among the Monetary Policy Committee.

As things stand, we can expect Ian McCafferty and Michael Saunders to vote for a quarter-point rate rise again (as they both did at June’s meeting)

Andy Haldane, BoE chief economist, could also join them, following his hint last week that rates should rise later this year.

But at least four MPC members are firmly in the no-change camp. Governor Mark Carney planted his flag there last week in his delayed Mansion House speech, and he’s now got Jon Cunliffe with him.

It’s also hard to see Ben Broadbent, the other deputy governor, defying Carney.

Gertjan Vlieghe, the former hedge fund economist, is another likely dove (he’s argued that it’s better to tighten too late than too early).

That leave the newest member of the MPC, economist Silvana Tenreyro, whose term starts in July. We don’t have many clues about her position.

One MPC seat is unfilled, following the untimely exit of Charlotte Hogg (she resigned after failing to declare that her brother worked for Barclays).

If Hogg hasn’t been replaced by August, then there could be a 4-4 split, giving Carney the casting vote.

Updated

Sir Jon Cunliffe has “drawn the battle lines” for August’s monetary policy committee meeting by arguing against an early interest rate rise, says Bloomberg’s Lucy Meakin.

Here’s a flavour of her piece:

While some members of the BOE’s rate-setting committee have argued that consumer-price inflation of 2.9 percent means an increase in bank rate is required imminently, Cunliffe said that has been driven by the pound’s depreciation since the Brexit referendum and that wage pressures have remained low.

Inflation above the 2 percent target is “not a comfortable place,” Cunliffe said in an interview on BBC radio. However, “we do have to look at what’s happening with domestic inflation pressures and on the data we have at the moment, that gives us a bit of time to see how this evolves.”

London house price growth hits five-year low

London house price are now rising at the slowest rate since 2012, says Nationwide.

This chart shows how house prices in the UK capital have come off the boil, having outpaced the rest of the country for several years.

It’s a remarkable reversal, says Jonathan Hopper, managing director of Garrington Property Finders:

“First came Britain’s electoral map, then its property map. June has seen them both redrawn.

“For London’s house prices to be growing at the second slowest rate in the country would have been unthinkable for much of the past decade.

“Instead growth is now spread much more evenly across the country, with the market fragmenting into a patchwork of smaller hotspots and coldspots.

Updated

House prices rebound: What the experts say

Jeremy Leaf, north London estate agent, agrees that the rebound in UK house prices in June is “a little surprising”.

He says that current low interest rates helped to push prices up by 1.1% last month, as did is a lack of supply:

‘However, looking forward the shortage of supply and lack of housebuilding are certainly two of the factors supporting the market.

These will need to improve if we are going to see more sustainable growth in housing transactions.

Neal Hudson of Residential Analysts points out that the housing market had a weak start to the year.

Property advisor Pete Wargent agrees that low availability of housing stock is a key factory:

Lucy Pendleton, Founder Director of independent estate agents James Pendleton, warns that the housing market faces four threats:

A gentle slide in prices could continue but it’s got less to do with Brexit and more to do with four factors that can be the Four Horsemen of the Apocalypse for markets - inflation, consumer credit, wage growth and mortgage activity - all of which have been dragging their heels recently.

“In May, mortgage approvals hit an eight-month low, wage growth slumped, inflation rose unexpectedly to 2.9%, a near four-year high, and consumer credit also fell dramatically.

“This combination of factors is not fertile soil for house price growth. What I expect to see from those buyers and sellers who don’t have to come to market right away, is the classic wait-and-see wobble as vendors put off selling, and buyers hold out for better deals.

“It’s this wait-and-see approach that can cause short-term falls to become a bit of a self-fulfilling prophecy but solid demand, particularly in urban areas, will cushion any retreat in prices.”

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UK house prices rebound in June

Now here’s a surprise.... UK house prices have rebounded quite strongly this month, despite a slowdown in London.

Prices rose by 1.1% in June, according to the latest figures from Nationwide, reversing three months of falls. That means the average house costs 3.1% more than a year ago, at £211,301.

Uk house price figures

But Robert Gardner, Nationwide’s Chief Economist, remains caution, saying:

“The annual rate of house price growth, which gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May.

In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.

The figures also show some interesting changes at the regional level. In London, prices have only risen by 1.2% in the last year, while East Anglia has enjoyed 5% house price inflation.

Jon Cunliffe also admitted that the recent surge in inflation, to 2.9%, means the Bank of England isn’t in a “comfortable place” right now.

Cunliffe: Now's not the time to raise rates

Deputy Governor of the Bank of England Jon Cunliffe.

The split at the Bank of England over when to raise interest rates has widened further this morning, after deputy governor Sir Jon Cunliffe waded in.

Cunliffe has come down firmly in the ‘don’t raise rates yet’ camp, arguing that there’s simply not enough pressure to justify a rate rise.

With households facing a wage squeeze, Cunliffe argues that inflicting higher borrowing costs would just make the situation worse.

This puts Cunliffe in opposition to at least two other policymakers, and means he’s firmly behind his boss, governor Mark Carney.

Cunliffe told BBC Radio that:

“[Consumer spending] is slowing as households’ real incomes are squeezed by higher inflation, we expect some of that slowing to be offset by growth in business investment, growth in exports. And I want to see how that plays out.

(We) do have to look at what’s happening to domestic inflation pressure, and I think that on the data we have at the moment, gives us a bit of time to see how this evolves.”

All sensible-sounding stuff.

But just a week ago, chief economist Andy Haldane shocked the markets by revealing that he expects to vote for a rate hike later this year..... Two other policymakers, Ian McCafferty and Michael Saunders, voted to raise rates in June (along with the departing Kristin Forbes).

So the next meeting, in August, could be a real humdinger as the hawks and doves trade blows over the state of the UK economy, the inflation threat, and the risks posed by Brexit.

Updated

The agenda: Central bankers in the spotlight again

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

Central bankers are commanding our attention again today. Last night, Federal Reserve chair Janet Yellen gave a rare hostage to fortune by predicting that we’ll probably live out our days without seeing a repeat of the 2008 crisis.

Yellen told an audience in London that:

“Would I say there will never, ever be another financial crisis?

“You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.”

But do other central bankers agree? We may find out later today, as the European Central Bank holds its annual Forum in Portugal’s Sintra.

Many of the top stars of monetary policy are attending, including ECB president Mario Draghi, the Bank of England’s Mark Carney, Japan’s Haruhiko Kuroda and Stephen Poloz of the Bank of Canada.

Yesterday, the Bank of England ordered UK banks to hold more capital in case of a consumer debt crisis. Today, we find out how British house prices are holding up in the face of Brexit uncertainty.

We’re also getting new US trade figures.

On the corporate front, electricals retailer Dixons Carphone and packaging giant Bunzl are reporting financial results.

And Britain’s financial watchdog, the FCA, is releasing a report into UK fund management industry. We’ll dig through the key points.

The agenda:

  • 7am BST: Nationwide house prices (details to come shortly!)
  • 1.30pm BST: US trade figures for May
  • 2.30pm: BST: Central bank chiefs panel with Mark Carney, Mario Draghi, Haruhiko Kuroda and Stephen Poloz in Sintra

Updated

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