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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

IMF cuts US growth forecast, as Bank of England tells banks to boost capital - as it happened

Watch the Bank of England press conference live, here

And finally (probably), European stock markets have ended the day in the red.

In London the FTSE100 lost 12 points to 7434, despite mining shares rallying, and there were deeper losses in Europe.

Currency moves are to blame; the euro strengthened after ECB president Mario Draghi spoke about reflation returning to the Eurozone as its recovery picked up.

The pound gained against the US dollar after the IMF cut its growth forecasts. Political developments in Scotland also nudged sterling up, as Josh Mahony of IG explains:

News that the SNP have formally abandoned their plan for a second referendum before the completion of Brexit has helped the pound’s ascent, with GBPUSD hitting the highest level in a week.

The IMF cut their outlook for the US economy today, which when considering the negative path of core PCE inflation, makes a September rate hike increasingly unlikely.

US consumer confidence strengthens

Newsflash: American consumer morale has jumped this month, despite the IMF’s concerns about the US economy.

The Conference Board’s consumer confidence index rose in June to 118.9, defying expectations that it would fall to 116.0 this month.

Optimism is close to a 16-year high, says Lynn Franco of the The Conference Board:

“Expectations for the short-term have eased somewhat, but are still upbeat. Overall, consumers anticipate the economy will continue expanding in the months ahead, but they do not foresee the pace of growth accelerating.”

Howard Archer, Chief Economic Advisor to the EY ITEM Club, is struck by the Bank of England’s decision to bring forwards its consumer credit stress tests by a couple of months:

“The risk to financial stability coming from the recent rapid growth in consumer credit would undoubtedly be magnified if there is a near-term interest rate hike. While any interest rate hike would be small with further increases some way off, even small increases could cause problems for some consumers given their high borrowing levels.

“It is notable that the Bank of England is bringing forward its testing of banks’ ability to cope with major losses on consumer loans to September from November. Additionally, regulators will in July publish their expectations for lenders in the consumer credit market.”

Wall Street has opened lower, with the IMF’s downgraded growth forecasts dampening the mood in New York.

The main indices are all in the red, with shares in Alphabet (Google) shedding more than 1.2% after it was slapped with a €2.4bn fine by Brussels today.

Wall Street open
Wall Street open Photograph: Bloomberg TV

The news that the IMF has downgraded its US growth forecasts and criticised Trump’s budget plans, has sent a ripple through the financial markets.

Here’s some snap reaction:

Here’s more reaction to the Bank of England’s financial stability report, from Hannah Maundrell, Editor in Chief of money.co.uk:

“The Bank of England is right to flag our debt binge as a big concern. Rock bottom interest rates have made borrowing cheap and we’ve definitely been making the most of it. The harsh reality is many households would struggle to pay back what they owe if interest rates went up.

Many are just about managing now and have little in savings to fall back on. Banks need to be prepared for this worst case scenario so they aren’t on shaky ground if rates go up.”

IMF cuts US growth forecasts

Newsflash: The International Monetary Fund has cut its US growth forecasts, and concluded that Donald Trump won’t boost economic activity after all.

The IMF now expects US GDP to rise by 2.1% in 2017, down from 2.3% back in April.

For 2018, it also sees growth of 2.1%, down from 2.5% three months ago.

The IMF had hoped that Trump’s pledge to boost fiscal spending, and cut taxes, would deliver a economic boost. But having seen the president in action, the Fund has had a rethink.

Importantly, it criticises Trump’s recent budget proposals, warning that they benefit the richest Americans more than the rest.

Reuters explains:

The IMF said the Trump administration’s latest budget plans would place a disproportionate share of spending cuts onto low-and middle-income households, adding “this would appear counter to the budget’s goals of promoting safety and prosperity for all Americans.”

Instead, the Fund suggested a tax policy that would improve the federal revenue-to-GDP ratio, more balanced cuts that strengthen the social safety net’s efficiency, and efforts to contain healthcare cost inflation.

It’s been an eventful couple of days in Greece, where prime minister Alexis Tsipras has held emergency talks with striking municipal rubbish collectors over demands for expiring short-term contracts to be replaced with permanent jobs.

With the sweltering heat fuelling mounting concerns that mounds of uncollected rubbish could soon become a public health risk, Tsipras invited unionists representing the workers to his office for talks last night.

In a statement his office said the invitation was addressed to unionists “to find a solution to the claims of the refuge workers and to avoid the dangers to public heath” posed by the prolonged strike” and very high temperatures that are expected in the coming days.”
Earlier today, scuffles broke out between unionists and security guards outside the building housing the prime minister’s quarters when attempts were made to unfold banners emblazoned with slogans and demands.

Cleaners scuffle with plain clothes policemen as they attempt to open a banner during a protest action outside the Greek Prime Minister office, in Athens today
Cleaners scuffle with plain clothes policemen as they attempt to open a banner during a protest action outside the Greek Prime Minister office, in Athens today Photograph: Yannis Kolesidis/EPA

The meeting is being described as critical by insiders who say given the heat wave now gripping Greece - and the arrival of hundreds of thousands of tourists in the capital alone - the strike has become a major political issue.

How Tsipras will be able to negotiate his way out of the crisis - and keep labour reform demanding international creditors on board - is anyone’s guess.

Alex Buttle, director of car buying website Motorway.co.uk, argues that Mark Carney is right to worry about the boom in car loans.

Here’s why:

“The growth of Personal Contract Plans over the past few years has been astronomical, and the level of consumer debt this is causing is getting out of hand.

“Despite the many hidden costs, it’s hard to resist the temptation of owning a new luxury car without having to find tens of thousands of pounds upfront to pay for it.

“The problem is that household finances are starting to get stretched and many people are probably living beyond their means because of readily available credit, including car loans.

“If people really do start to struggle financially, then the priority will be keeping a roof over their heads, and they are far more likely to default on a car loan than a mortgage.

“We could well see a spike in people defaulting on their car loans in favour of losing their home if the economic climate takes a turn for the worst.”

The pound has inched higher against the US dollar through the day, and is currently 0.3% higher at $1.2764.

However, it is still down 0.5% against the euro at €1.1314, after ECB chief Mario Draghi gave an optimistic view of the eurozone economy.

Connor Campbell of SpreadEx says that the “barrage of information” in the Bank of England’s financial stability review didn’t actually move the markets that much.

He says:

The FTSE maintained its 15 point drop, the gains in the commodity and banking sectors – the former benefiting from a Brent Crude bounce, the latter from yesterday’s Italian bank bailout – failing to counteract the effects of the drop in consumer confidence revealed by YouGov. As for the pound, while it suffered some serious losses against the euro, it still managed to climb 0.2% against the dollar.

Bank of England: The key points

Bank of England Governor Mark Carney speaking today.
Bank of England Governor Mark Carney speaking today. Photograph: Jonathan Brady/AFP/Getty Images

That wasn’t the most illuminating press conference with Mark Carney, but here’s what we learned.

The Bank of England is pushing the UK financial sector to prepare for a downturn, by making them hold an extra £11bn of capital. But.... Carney says this won’t be a problem, as banks already hold more capital than required, since the rule were relaxed after the Brexit vote.

As Carney puts it:

We want to move the levels of capital back up to the level they should be -- any time you move into more benign credit conditions there have been fewer defaults.

The BoE is concerned that some lenders are becoming too reckless, saying that:

“Consumer credit has increased rapidly. Lending conditions in the mortgage market are becoming easier. Lenders may be placing undue weight on the recent performance of loans in benign conditions.”

The Bank’s key target appears to be complacency, as it scrambles to bring its consumer credit stress tests forward by three months to September.

It is particularly interested in the car market, following the boom in “Personal Contract Purchase” deals. These allow customers to pay a monthly fee for a new car, and then either pay a hefty ‘balloon payment’ to actually own it, or switch to a new deal with a new vehicle. The fear is that customers could be left high and dry if financial conditions tighten.

However (and this is where the confusion starts) the Bank doesn’t want consumers to cut up their credit cards and stop trying to shimmy up the housing ladder. Instead, it wants them to be sensible when borrowing, and trust that the Bank is keeping the financial system strong.

Those families who are most over-extended, and wouldn’t cope with higher borrowing costs, are a concern, though:

On Brexit, Carney repeatedly said the Bank’s contingency planning is focusing on the most disruptive scenario, in which Britain crashes out of the EU without a deal. But that doesn’t mean the BoE expects such a cliff-edge exit.....

If you’re just tuning in, here’s Jill Treanor’s story about the Bank of England’s financial stability report:

Final question:

Q: You say you expect to raise the counter-cyclical buffer to 1% in November, but could Brexit force a cut back from 0.5% to 0% (reversing today’s move)

Mark Carney says the BoE thinks the buffer should be around 1% in stable times. The BoE had started the process of raising the buffer last year, before the Brexit vote, which led it to be cut back to 0% to take worries about lending ‘off the table’.

So.... we could have decided to hike the buffer to 1% today, but it was more sensible to allow a ‘gradual build’ (to 0.5% today, and 1% in November)

On Brexit, we want the system to be as resilient as possible to prepare for any outcome in 640 days time, he concludes.

I think that means the BoE want the banking sector to be well capitalised, in case of any Brexit shock in March 2019, when Britain leaves the EU.

Updated

Q: You say that West End asset prices are ‘unsustainable’; when might they return to reality, and what impact would that happen?

Carney reiterates his earlier point that Britain currently have “Very low risk-free rates, and high valuation levels”. So either those rates should rise, or asset prices should fall.

It would be foolish to put a timescale on it - prices can stay unsustainable for a long time, and then correct quickly, he warns.

Carney: We've had very productive discussions with US regulators

Q: The report talks about the need for ‘consistent implementation’ of international standards; are you particularly worried about the Trump administration?

Carney says it is important to have open global standards, and even more important that they are implemented, to avoid another financial crisis.

You also need supervisory co-operation between regulators...and we want to reinforce that where possible.

On the US, we have had “very productive discussions” with regulators about it.

Carney explains how many countries have some unique rules (such as America’s Volcker rule, or bank ring-fencing in the UK), which they can change without affecting other nations. But there needs to be more co-ordination when it comes to global standards, if there are areas of ‘inconsistency’ that need to be addressed.

[Explainer: Donald Trump has vowed to cut regulations in the financial sector, such as the Volcker rule which is meant to prevent banks taking dangerous trading risks.

Trump is also keen to repeal Dodd-Frank, which was brought in after the financial crisis. ]

Q: You point out that commercial real estate assets are overvalued, and could unwind if people try to sell them in a rush. That happened after the Brexit vote - has anything changed since?

[explainer: several property funds froze redemptions after the EU referendum, to stop investors cashing out, exposing the dangers of investing in ‘illiquid assets’ such as shopping centres]

Carney says there is a disconnect between the market expectations for future growth, and the value of commercial buildings.

So either those expectations will rise, or commercial asset values will fall.

Q: Isn’t the boom in consumer credit due to you keeping interest rates so low?

Carney insists he’s not to blame, and points to the broader context of a UK economy that has grown solidly over the last 12 months (despite slowing in the first quarter of 2017).

Here’s a chart showing how consumer debt has grown:

Carney says the boom in car loans is a major factor behind the pick-up in consumer debt recently, but he remains “sanguine” about the banking sector’s overall exposure to it.

BoE: Now's the time to check consumer credit

Q: Your charts show that consumer finance has been growing faster than household income since 2014, so shouldn’t you have issued today’s warning sooner?

Deputy governor Sir John Cunliffe says consumer borrowing actually picked up in 2013, but overall household lending actually grew slower than the UK economy.

Consumer borrowing is £200bn, compared to £1.4 trillion in mortgage lending, he explains - so the BoE has to decide when it’s a serious worry.

We’ve been watching consumer credit for a while, and now is the time to look at whether underwriting standards are starting to slip, and bring forwards our stress test (by three months, to September)

Q: Are banks misbehaving and gaming the system, and is there a cultural problem?

They’re not gaming the system, but they’re not learning the lessons of the past, Carney says.

Updated

Q: Which consumer borrowing are you most worried about?

Carney cites the sharp build up in car financing – both in volume, and the move towards ‘personal contract purchasing’ deals (where buyers pay monthly repayments, and then face a large balloon payment to actually own their car)

Q: How confident are you that banks can raise the extra capital you are demanding?

They all have this capital on their books at present, Carney replies. It’s a question of reallocating capital from other areas (and perhaps choosing to raise more capital)

The extra capital buffer will mean UK banks must meet a 4% leverage ratio, Carney explains, but the current leverage ratio is actually 5.25%.

In other words, Banks shouldn’t face a massive challenge meeting the BoE’s demands.

Updated

Q: Has the general election changed your view of how the Brexit talks will evolve, and raised the risks from political instability?

The short answer is no, governor Carney replies.

Our job is to work out what might go wrong and prepare for it, rather than assessing quite how likely various scenarios are. So June’s general election hasn’t changed the Bank’s contingency planning for Brexit.

Q: How worried are you about the British banking sector’s exposure to China?

Risks from China are at the top end of global risks, Carney replies.

That’s due to the build-up of debt, structural issues in the financial system, and the challenge of growing the economy while also maintaining stability.

Q: What role are interest rates playing in exaggerating or reining in financial stability risks?

Monetary policy is the ‘last line of defence’, says Carney, and we don’t need monetary policy to do our job of ensuring financial stability, Carney continues.

If the Financial Policy Committee does its job properly, then the MPC can focus on its job of getting inflation back to target.

Q: And what would you say to those who think that being responsible for financial stability is distracting you from the job of setting interest rates and controlling inflation?

Carney (who chairs both the FPC and the Monetary Policy Committee which sets borrowing costs) denies that he’s got too much on his plate.

It takes as long to decide to raise rates as to cut then as to leave them on hold, he replies. I’ve been doing this job for many years at two central banks (the BoE and the Bank of Canada).

And he’s not biting....

Q: You’re telling banks that times are changing, and they should set aside more capital, but shouldn’t consumers also recognise that times are changing and rein in our borrowings?

I’m not going to give individual financial advice, says Mark Carney (you’re on your own, folks, sorry).

He then explains that the Bank is trying to strengthen the resilience of the core of the system, in case a crisis strike.

The message for the public is that if things become bumpy, in the Brexit transition or because of problems in the global economy, then the financial system will be there for them, says the governor, adding:

Individuals must take the judgement whether it’s the right time to buy a property, or invest in a business, and we’re trying to ensure that the financial system is there to help them with that.

Mark Carney at today’s press conferenece
Mark Carney at today’s press conferenece Photograph: Bank of England

Q: You seem to be blaming lenders, rather than consumers, for the rise in consumer credit - but shouldn’t people be more cautious about how much debt they take on?

Carney says that UK households have deleveraged a lot since the financial crisis, and only releveraged recently.

He wouldn’t say that households as a whole are taking elevated risks.

The first line of defence is that lenders themselves are responsible; the second line of defence is banks set aside enough capital incase of a downturn.

Carney states the obvious

Q: How concerned are you that UK consumers are borrowing too much, and will find themselves in difficulties when interest rates rise?

Mark Carney replies that the BoE’s message, in good times or bad ones, is that anyone who takes out a loan should consider that they could face adverse conditions in the future, such as weaker growth and higher interest rates.

This “stating the obvious, which is often what you get from a central banker”, is particularly appropriate today, the governor adds smilingly.

Updated

On cybercrime, Carney says the Bank is setting out the framework that will be needed to protect the UK financial system from computer attacks.

Carney: We're preparing Brexit scenarios

On Brexit, Carney says the Bank is making contingency plans for all possible outcomes, and concentrating on those would have the greatest impact on the economy.

That includes the possibility that Britain leaves the European Union without a deal (this is the ‘cliff-edge Brexit’ that many firms fear).

Carney says that forcing banks to hold more capital (by raising the counter-cyclical buffer to 0.5% today, and probably to 1% in November) will more protection to losses.

Carney: Consumer credit growth and Brexit are key risks

Mark Carney begins his press conference by saying that financial stability has been strengthened since the 2008 crisis.

But the job of tackling financial dangers is “never done, and risks are evolving.”

The financial policy committee thinks that the overall risks from the domestic environment are at a “standard level”, with most indicators neither “particularly elevated nor subdued”.

But there are some risks that require particular vigilance, he continues

One is consumer credit – growth has “far outpaced” household income in the last year, including credit cards and loans to buy new homes. And with the market competitive, lenders are vulnerable to a downturn.

The second worry is Brexit – the range of possible outcomes as Britian leaves the EU, and the paths to them.

Updated

Watch the BoE press conference here.

Mark Carney is facing financial reporters at the Bank of England now, to explain the thinking behind today’s financial stability report.

You can watch it live here:

Breaking: Google fined record €2.42bn by EU

Google fined

Google has been handed a record €2.42bn fine by Brussels over alleged abuse of its market dominance.

It was a much bigger than expected fine, with most predicting a penalty in the region of €1bn.

EU antitrust officials have accused the search engine giant of illegally favouring its shopping service.

It is the biggest fine for a single company in an EU antitrust case, and follows a seven-year investigation.

European commissioner Margrethe Vestager, in charge of competition policy, said:

Google has come up with many innovative products and services that have made a difference to our lives. That’s a good thing. But Google’s strategy for its comparison shopping service wasn’t just about attracting customers by making its product better than those of its rivals. Instead, Google abused its market dominance as a search engine by promoting its own comparison shopping service in its search results, and demoting those of competitors.

What Google has done is illegal under EU antitrust rules. It denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.

More soon...

And here is the background:

Updated

Financial stability report: instant reaction

City experts are trawling through the Bank of England’s financial stability report.

Duncan Weldon of Resolution Group has spotted a chart showing how consumer credit losses rise when unemployment increases.

No wonder the Bank is forcing lenders to stash more capital in their vaults now, in case an economic downturn forces more consumers to default on their loans.

Alistair McQueen of Aviva points to another chart, showing how a drop in house prices can ripple through the system, triggering ‘fire sales’ and further losses.

Steve Hawkes of The Sun has a pithy summary:

The BoE’s financial stability report is online here.

Here’s an infographic form the Bank, setting the scene:

BoE financial stability report

Bank of England report: The Key Points

The Bank of England is also boosting its work on cybercrime and continuing its work on Brexit’s impact.

That’s on top of ordering UK banks to set aside more capital, and rushing forwards its consumer stress tests.

Here are the five key points from the financial stability report. The Bank of England is....

• Increasing the UK countercyclical capital buffer rate to 0.5%, from 0%. Absent a material change in the outlook, and consistent with its stated policy for a standard risk environment and of moving gradually, the FPC expects to increase the rate to 1% at its November meeting.

• Bringing forward the assessment of stressed losses on consumer credit lending in the Bank’s 2017 annual stress test. This will inform the FPC’s assessment at its next meeting of any additional resilience required in aggregate against this lending. The FPC further supports the intentions of the Prudential Regulation Authority and Financial Conduct Authority to publish, in July, their expectations of lenders in the consumer credit market.

• Clarifying its existing insurance measures in the mortgage market, designed to prevent excessive growth in the number of highly indebted households. This will promote consistency across lenders in their application of tests to assess whether new mortgage borrowers can afford repayments.

• Consistent with its previous commitment, restoring the level of resilience delivered by its leverage ratio standard to the level it delivered in July 2016 before the FPC excluded central bank reserves from the leverage ratio exposure measure. The FPC intends to set the minimum leverage requirement at 3.25% of non-reserve exposures, subject to consultation.

• Overseeing contingency planning to mitigate risks to financial stability as the United Kingdom withdraws from the European Union.

• Building on the programme of cyber resilience testing it instigated in 2013, by setting out the essential elements of the regulatory framework for maintaining cyber resilience. It will now monitor that each element is being fulfilled by the relevant UK authorities.

Updated

Another important point: the Bank of England is also bringing forwards its planned stress test on consumer credit lending to September, from November.

That test will assess whether UK banks can handle a jump in consumer credit losses.

Today’s change means that UK banks will have to set aside more than £11bn of extra capital to cover potential losses if the economy weakens:

From the BoE, my colleague Jill Treanor explains:

The Bank of England is to force banks to hold more capital in the face of rapid growth in lending on credit cards, car finance and personal loans.

The intervention by Threadneedle Street, which could amount to banks needing £11.4bn of extra capital in the next 18 months, is one of a number of measures intended to protect the financial system from the growth in consumer finance.

BANK OF ENGLAND RELEASES FINANCIAL STABILITY REPORT

Here we go! The Bank of England has told Britain’s banks to start setting aside more capital to protect themselves from a financial downturn.

That’s one of the key lines from the Financial Stability Report.

As predicted, the BoE is raising the counter-cyclical capital buffer (CCyB), so that banks must set aside 0.5% of their assets as capital in case of a rainy day.

That means it is reversing one of measures taken after the Brexit vote, a year ago.

Interestingly, the BoE says it expecs to raise CCyB again, in November, to 1%.

More to follow....

Tension is building in the City as traders wait for the Bank of England’s financial stability report to hit the wires, in just five minutes.

The rise in the euro has pushed Europe’s stock markets down.

Ever index is now in the red, with the Stoxx 600 losing 0.6%.

European stock markets today
European stock markets today Photograph: Thomson Reuters

A stronger euro isn’t great news for eurozone exporters, of course. But the key point is that Draghi is being optimistic -- that’s no reason to dump shares.

Neil Wilson of ETX Capital says traders shouldn’t be too skittish:

Draghi suggested inflation is becoming more sustainable and deflationary forces have been replaced by reflationary forces. Importantly he suggests deflationary forces are external, temporary shocks and the ECB can overlook. That’s what happens when you open the taps on a massive stimulus programme. The question is whether the Eurozone would survive without the QE support.

Draghi sounded more circumspect on that front, arguing that he is confident that monetary policy is working but still needs to remain very loose. Again it’s a stretch to describe it as hawkish – Draghi is simply affirming that loose monetary policy is working without significant adverse consequences and therefore should be maintained. He’s not advocating tightening any time soon.

The European commission just dropped a loud hint that the Google antitrust fine is coming this morning....

This tweet is from EC press officer Yizhou Ren:

Updated

Mario Draghi’s bullish talk has also sent the pound down against the euro, shedding 0.4% to €1.133.

That means one euro buys 88.2p, up from 87.9p on Monday. Good news for eurozone holidaymakers heading to the UK this summer, but a blow to Britons planning a continental jaunt.

Here’s Reuters take on Draghi’s speech:

The euro zone still needs “considerable” monetary support from the European CentralBank even as its economy recovers steadily and inflation picks up, ECB President Mario Draghi said on Tuesday.

“All the signs now point to a strengthening and broadening recovery in the euro area. Deflationary forces have been replaced by reflationary ones,” Draghi said at the ECB’s annual policy forum in Sintra, Portugal.

“However, a considerable degree of monetary accommodation is still needed for inflation dynamics to become durable and self-sustaining.”

Updated

Here’s a chart showing how the euro spiked as Draghi spoke in Portugal:

Mario Draghi

Euro jumps as Draghi speaks

Oooh. The euro is rallying as Mario Draghi tells the ECB Forum that reflationary pressures in the eurozone are building, as the economy recovers.

The single currency has jumped by half a cent against the US dollar, to $1.1235, with Draghi sounding more upbeat and hawkish than expected.

Draghi has also told his audience that “a considerable degree” of stimulus is still needed in the eurozone, and that the ECB must be ‘prudent’ in how it unwinds it.

Draghi has previously talked about a ‘substantial degree’ of help being needed, and Arne Petimezas, analyst at AFS Group in the Netherlands, thinks this wording is significant.

Updated

Not for the first (or last) time, Mario Draghi’s message is that his policies are delivering the goods....

Draghi: Recovery is strengthening and broadening

Over in Sintra, European Central Bank president Mario Draghi is giving the keynote speech at the ECB’s Forum now. It’s being streamed here.

Draghi says there are clear signs of a “strengthening and broadening” recovery underway in the eurozone area.

There have been 16 straight quarters of growth in the euro area, he says.

But this nascent growth needs to become sustainable, and that means higher productivity growth.

Central bankers face an unusual challenge today, Draghi continues – they face growth that is “above trend and well distributed across the euro area”.

But at the same time, inflation is more muted than you’d expect.

To decide the right approach (ie, when to cut the ECB’s stimulus package), you need to understand the causes, Draghi cautions.

And Draghi’s assessment is that monetary policy is working to build up reflationary pressures.

But it’s being slowed by external price shocks, slack in the labour market, and a change in how the labour market and inflation interact, he concludes.

Updated

Five things to watch for from the Bank of England

The FT’s Chris Giles has pulled together a list of key issues to watch for today, when the Bank of England releases its twice-yearly report on financial stability.

Here’s a flavour:

  1. Will the BoE remove its emergency support for banks? It could raise its “counter-cyclical capital buffer”, to force banks to hold more capital. A year ago, after the EU referendum, the BoE reduced this buffer to zero, but it may now conclude that this emergency help is no longer needed.
  2. Will it try to curb consumer borrowing? The FPC may tell banks to cut back on “teaser” interest rates, to prevent a surge in defaults.
  3. Is car finance out of control? UK car sales have been strong for many months, thanks to cheap credit and new “personal contract payment” deals that make it easier to buy a new vehicle.
  4. Is the mortgage market a worry? A housing crash would have very serious consequences for the economy, so investors will want to hear Carney’s views
  5. Brexit blues? With negotiations with Brussels finally underway, will the Bank say anything about the risks of a drop in confidence in UK assets?

More here.

UK consumer confidence hit by hung parliament and house prices

UK consumer confidence has plunged since June’s general election, as the shock of a hung parliament hits households.

It gives the Bank of England a fresh headache as it considers the health of the UK economy, ahead of today’s Financial Stability Report.

Pollsters at YouGov found that UK citizens are fretting about political uncertainty, rising inflation, falling real wages, and the state of the housing market.

YouGov found there was a “pronounced collapse in consumer confidence following the election”. The sight of Theresa May losing her majority sent its consumer morale index sliding to 105.2 from 109.1.

For June as a whole, consumer confidence dropped to 106.9, its second-lowest level since the summer of 2013.

UK consumer confidence

Stephen Harmston, head of YouGov, says that the UK housing slowdown is causing particular alarm (Nationwide says prices have fallen for the last three months)

“The hung parliament seems to have further dampened consumers’ spirits, which were already sinking following the continued squeeze on household finances.

“But the real cause for alarm will be the cooling of the property market, as this is one of the key things that has propped up consumer confidence over the past few years.”

More here:

Updated

The agenda: Bank of England's financial stability report

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

We’re facing central bank overload today, with monetary policy chiefs speaking in London, and the Portuguese town of Sintra.

All eyes will be on the Bank of England, as its powerful Financial Policy Committee releases its latest report followed by a press conference with Governor Mark Carney.

The FPC, which is charged with maintaining financial stability, could order banks to rein in their riskier lending, following growing fears that consumer borrowing is getting out of hand.

The Bank could also tell City banks to start restocking their capital buffers, having previously told banks to lend more after the Brexit vote.

Meanwhile in sunny (ish) Sintra, the European Central Bank is holding its annual forum. We’ll be hearing from Mario Draghi, ECB president, who last night told students in Portugal that his massive stimulus scheme was creating employment.

Challenged over the Bank’s huge money-printing programme, Draghi declared that:

“The millennials that found a job because of our policy, I’m pretty sure they are okay” [with the ECB’s policies] .

And he also denied that savers had been unfairly treated, arguing that they’re also benefitting from the recovery, as:

“Recessions are not good for anybody, savers or non-savers,

It could be a busy morning, as there’s a strong chance that Google will be hit with a whopping fine this morning, of over €1bn, for breaching Europe’s competition rules.

That would end a long inquiry into whether Google used its dominant search engine to unfairly promote its Google Shopping service, but could spark an angry response from America.

And then tonight, the world’s most powerful central banker, Federal Reserve chair Janet Yellen, is speaking at London’s Royal Academy. We’re promised a “wide-ranging discussion about global economic issues.”

On the corporate front, retail group Debenhams and car hire chain Northgate are reporting results, plus there are retail sales figures in the UK and consumer confidence stats from America to keep us on our toes.

The agenda

  • 9am BST: Mario Draghi gives keynote speech at the ECB Forum in Sintra
  • 10.30am BST: Bank of England releases financial stability report
  • 11am BST: BoE governor Mark Carney’s press conference
  • 11am BST: CBI’s UK retail sales figures
  • 3pm: US consumer confidence report
  • 6pm: Janet Yellen gives the British Academy ‘President’s Lecture’

Updated

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The New Fleetwood Mac Documentary Sounds Like It Could Be Great, But One Thing Disappoints Me
I fear there will be little love for Peter Green.
Cinemablend
Cinemablend
“April Fools, Right?”: Fans Tore Apart Amy Schumer After She Posted Polemical New Selfie
“Thirsty? My eyes are thirsty for bleach after seeing that. Yikes,” wrote one user.
Bored Panda
Bored Panda
Tiger Woods Accused Of Paying Female 'Supplier' Extra For Alleged Hook-Ups
A viral TikTok video has sparked speculation involving Tiger Woods, highlighting the challenges of unverified celebrity gossip in the digital age.
International Business Times UK
International Business Times UK
Anya Taylor-Joy Would Like To Clear Up Those Rumors (She Started) About Puking While Recording Princess Peach
Here's what really happened.
Cinemablend
Cinemablend
IShowSpeed quits YouTube, fans left speechless by the real reason
Internet sensation IShowSpeed sparked concern with a YouTube exit announcement. Fans feared losing their favorite streamer. However, the news was a playful April Fools' Day prank. IShowSpeed confirmed he is not leaving the platform. Viewers expressed relief and anticipation for more content. The incident highlighted the fun of online humor.
The Times of India
The Times of India
Disney Park Guests Watch In Horror As Rapunzel Attacked By Crows Days After Viral Olaf Malfunction
Another day, another Disney disaster.
Bored Panda
Bored Panda
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