Get all your news in one place.
100's of premium titles.
One app.
Start reading
The Guardian - UK
The Guardian - UK
Business
Graeme Wearden (now) and Nick Fletcher

Federal Reserve raises US interest rates and says businesses fear trade wars - as it happened

Federal Reserve Chairman Jerome Powell speaking today
Federal Reserve Chairman Jerome Powell speaking today Photograph: Aaron P. Bernstein/Reuters

Shares dip after Powell faces the press

And finally.... Wall Street has closed sightly in the red after Jay Powell’s debut press conference.

The Dow Jones industrial average ended 45 points lower at 24,682, a dip of nearly 0.2%.

The tech-focused Nasdaq lost 0.5%, although Facebook stemmed its recent sharp losses by gaining 0.75%.

Traders in New York got a clear message from Powell - the process of raising US interest rate further away from their crisis-era record lows will continue,

Jeremy Gatto, Investment Manager on Unigestion’s multi asset Navigator fund, explains:

“Today’s FOMC meeting confirms the scenario we have been advocating for some time, that ‘monetary policy normalisation’ is well and truly underway.

As expected Powell committed to raise rates, indicating strong global economic growth, while highlighting that the Federal Reserve is seeking a ‘middle ground’ agenda.

And that’s all for tonight. Thanks for reading and commenting. GW and NF

Ranko Berich, head of market analysis at Monex Europe, says Jerome Powell avoided any shocks today.

Indeed, the new Fed chair maintained the same cautious approach as his predecessor, Janet Yellen:

“Jay Powell’s first Fed presser went more or less as expected, with the FOMC raising rates and making some vague hawkish noises about the future while maintaining its cautious approach to policy tightening.

“As with his testimony to lawmakers, the Fed Chair stuck to the “Powell Doctrine” of studiously avoiding commenting on political issues. If the Fed will react to trade or fiscal policy, it will do so only once it is looking directly at the economic effects of those policies.

“Powell noted that there is a range of opinion on the committee on the outlook, meaning as always that the Fed’s projections should not be taken as gospel. But today’s FOMC median projections did include a mild inflation overshoot in 2019 and 2020, yet this did not prompt a policy response, further underlining the fact that Yellen’s cautious approach to policy is alive and well.”

Bloomberg’s Luke Kawa has summed up Jerome Powell’s approach rather well:

Powell press conference: snap summary

That’s it! Jerome Powell has wrapped up his first press conference as Fed chair after 45 minutes, around 15 minutes quicker than expected.

He rattled through the questions swiftly, giving sharp and clear answers - without any diversions into deep economic theory.

I was stuck by Powell’s warning that the new tariffs on steel and aluminium are worrying businesses leaders in America. The Fed must be a little anxious that a trade war will break out, even though Powell declined to talk about relations between Washington and Beijing.

Powell sounded confident about the US economy, and also tried to persuade reporters not to get too excited by the Fed’s famous dot charts. They’re only predictions of future rate hikes, not an oracle, after all.

He hinted that he might change policy and hold a press conference after every Fed meeting -- so we might be seeing a lot more of Mr Powell in future.

Here’s some more reaction:

Powell sways elegantly to avoid a potential curveball on political issues.

He says he’s not kept awake at night, worrying whether he’s free to raise rates ahead of the midterm elections this autumn.

On wages, Powell says he’s surprised that wages haven’t risen faster, given the pace of the economic recovery.

Powell: trade is a 'more prominent' risk

Q: What impact would a US-China trade war have on the global economy?

Powell replies that trade wars are a “low profile risk” that has become “a more prominent risk to the outlook”.

However he won’t comment on trade policy between countries.

Powell says the Fed expects Donald Trump’s tax cuts will have a “meaningful” impact on the economy, although its full effect isn’t clear.

Ooooh. Asked about financial risks, Jerome Powell warns that the prices of some assets are ‘elevated’, including shares.

Powell: Trump's tariffs are worrying businesses

Q: What impact might the US government’s tariffs have on American monetary policy?

Fed chair Jerome Powell says that a number of FOMC committee members brought up the issue of tariffs at this week’s meeting.

We don’t think that changes in trade policy should have any effect on the current outlook, he explains.

However, “a number of participants” reported that they had met with business leaders; trade policy has become a concern going forward with that group, Powell warns.

Pressed on this point, Powell says there is a risk that the economic outlook could suffer if there was “more widespread retaliation” and actions back-and-forth between countries.

Today’s meeting comes less than two weeks after Donald Trump signed the order to impose tariffs on imports of steel and aluminum.

Q: Would you like to hold more Fed press conferences?

Powell says he is considering whether to hold a press conference after every FOMC meeting (the committee meets eight times a year, but only hold a press conference four times).

But he’s concerned that people might think he’s signalling a change to monetary policy (because investors don’t expect any big news at meetings without a press conference).

Asked about the neutral rate of interest, Powell says he and his colleagues believe is is still “quite low”

Jerome Powell suggests we shouldn’t get too fixated on the dot-plot forecasts of where each Fed policymaker believe interest rates will be in future.

We only had one decision today, and that was to raise the Funds rate, he says. No-one voted on what the ‘mean’ projection should be.

Here’s a clip of Powell’s opening statement:

Q: How concerned would you be if US inflation rose over your 2% target?

Powell says the Fed would be concerned about “sustained deviation” above or below its target.

We’re swiftly onto questions.

Q: The Fed has raised its growth forecasts, and sees unemployment lower than before, but hasn’t changed its forecast for inflation much. Why?

Jerome Powell says the US unemployment rate has fallen from 10% during the crisis to just 4.1% today, but with only very gradual pressure on inflation.

That suggests the relationship between changes in labor market slack and inflation isn’t very tight.

So the Fed is trying to take the middle ground, by making gradual changes to the Federal Funds rate.

Updated

Jerome Powell's press conference begins

The new Federal Reserve chair, Jerome Powell, has arrived for his first press conference since succeeding Janet Yellen.

He confirms that the Federal Open Market Committee voted to raise US interest rates today. He calls it another another step in the process of gradually scaling back accommodative monetary policy.

Powell says the economic outlook has strengthened in recent months, and that the FOMC expects the jobs market to remain strong.

On the outlook, he says the Fed will be watching how the economy performs in the months and years ahead.

Fed hikes: What the experts say

Nancy Curtin, chief investment officer at Close Brothers Asset Management, says today’s rate hike was a “fairly straightforward decision”:

The US economy seems to be in somewhat of a sweet spot, with a synchronised global economy, a weaker dollar, fiscal expansion and the prospect of increased business investment all supportive of growth. Wholesale tax reform should filter through more strongly into the economic data ahead, providing increased growth momentum. At the same time, inflation is showing signs of getting close to the Fed’s goal, and spare capacity in the labour market is declining.

Michael Pearce of Capital Economics says the Federal Reserve is signalling that rates will rise faster than expected in the next 21 months.

The Fed’s decision to raise interest rates by 25bp today was widely expected but some investors may have been caught off-guard by the degree to which Fed officials increased their projections for future interest rate hikes. The median projection for the fed funds rate at the end of 2019 is now 2.75-3.00% - exactly in line with our own forecast, which until recently was at the hawkish end of the spectrum.

Today’s decision to raise the federal funds rate to 1.50% – 1.75% was unanimous; the two dissenters at the December meeting, Charles Evans and Neel Kashkari, are not voting FOMC members this year and their replacements are more hawkish.

Aaron Anderson, Senior Vice President of Research, Fisher Investments, comments:

The Fed’s more hawkish tone could simply be a result of new Chairman Powell’s communication style compared to Janet Yellen, or it could mean the Fed believes recent economic data signal a strengthening economy, tighter labor market, and higher inflation.

But if a few data points since the last meeting were enough to change the Fed’s plans, they could change just as easily in the future.”

Here’s Nell Henderson of the Wall Street Journal on those dots...

Markets rally after Fed decisions

Shares are pushing higher on Wall Street, as traders react to the Fed announcement.

The Dow is now up 180 points, or 0.75%, having been around 135 points higher earlier.

That shows there is relief that the rate-setting committee isn’t predicting four rate hikes in 2018.

What the dot plot tells us

Here’s the latest ‘dot plot’ from the Federal Reserve’s policymakers, showing where they expect interest rates to be at the end of 2018.

Fed dot lot

Today’s guesstimates are in the right-hand column, next to the ones from December’s meeting. As you can see, the majority expect rates to have risen to 2.25% - ie, two more hikes on top of today’s one.

But, there has been an upward movement among the dots, compared to three months ago, suggesting the Fed is a little more hawkish.

Looking further ahead, policymakers now expect another 3 hikes in 2019 (up from two in December) plus two in 2020:

Updated

Fed: The economic outlook has strengthened

The Fed has also signalled its confidence in the strength of the US economy.

In a statement announcing the rate hike, it says:

Information received since the Federal Open Market Committee met in January indicates that the labor market has continued to strengthen and that economic activity has been rising at a moderate rate. Job gains have been strong in recent months, and the unemployment rate has stayed low.

It has then added a new line, declaring:

The economic outlook has strengthened in recent months.

Updated

Looking further ahead, the Fed is more hawkish about how fast US interest rates will rise:

Updated

The Fed is sticking with its forecast that it will raise interest rates three times in 2018 (including today’s hike, of course!).

FED HIKES

NEWSFLASH: The Federal Reserve has raised US interest rates.

The Fed’s Open Market committee has voted to hike the target for the Federal Funds rate, to 1.5% to 1.75% - up from 1.25% to 1.5%.

More to follow....

A quick check at the markets - the Dow is up 0.5%, or 134 points, at 24,861 as Wall Street braces for the Federal Reserve announcement....

The US dollar is down around 0.5% against the pound, at $1.407.

Updated

The Fed decision is imminent...

Traders on the floor of the New York Stock Exchange today
Traders on the floor of the New York Stock Exchange today Photograph: Richard Drew/AP

Tension is mounting, with less than 20 minutes to go until the Federal Reserve decision hits the wires.

Most traders expect the Fed to hike borrowing costs today - so the real interest is in how many further hikes are expected.

Miles Eakers, Chief Market Analyst at Centtrip, explains:

“The Federal Open Market Committee are widely expected to raise the target range for the federal funds rate later today.

Last December, the median forecast for the funds rate by year end was 2.1% which implied three hikes. But since then, hawkish rhetoric from the Fed has swayed market expectation towards four rate hikes in 2018.

Any confirmation of this will create volatility.

European markets edgy ahead of Fed

As investors await the Federal Reserve decision, European markets have ended on a mixed note.

With Wall Street now in positive territory, most have come back from their worst levels, but uncertainty over the Fed’s future interest rate policy meant caution was the watchword. Meanwhile the problems with UK retailers put the FTSE 100 under added pressure. The final scores showed:

  • The FTSE 100 finished down 22.3 points or 0.32% at 7038.97
  • Germany’s Dax edged up 0.01% to 12,309.15
  • France’s Cac closed down 0.24% at 5239.74
  • Italy’s FTSE MIB added 0.1% to 22,820.12
  • Spain’s Ibex ended 0.52% lower at 9630.9
  • In Greece, the Athens market lost 0.68% to 800.10

On Wall Street, the Dow Jones Industrial Average has recovered from its early falls and is now up 88 points or 0.36%.

Updated

The dollar has dipped ahead of the Federal Reserve meeting, despite the prospect of a rate rise announcement. Connor Campbell, financial analyst at Spreadex, said:

In a move that surprised no-one the Dow Jones was incredibly reticent to do much after the bell rang on Wall Street, as investors eye the month’s Fed meeting.

The Dow dipped 0.1% this Wednesday; enough of a drop to suggest some pre-Fed fretting, but nothing to really tip its hand as to what it’s are expecting from the March statement. The dollar was more interesting in that regard. The greenback fell half a percent against the pound, 0.4% against the euro and 0.2% the yen, hinting that investors are perhaps a tad worried that Jerome Powell, in his first outing as the central bank’s chief, won’t be as hawkish as they want.

Interestingly the questions surrounding the meeting are less about what the Fed will do, but more about how they do it. At this point a rate rise seems almost guaranteed, a move that would take the benchmark interest rate to 1.75%. What is less certain are how many interest rate increases will follow throughout 2018, namely whether Powell will pull the trigger a further 2 or 3 times after his debut hike.

More signs of strength in the US economy ahead of the Federal Reserve rate decision.

Home sales jumped 3% in February to a seasonally adjusted annual rate of 5.54 units, according to the National Association of Realtors. Analysts has expected a rise of just 0.5%. But there is a shortage of available homes which is pushing up prices and helping to price first time buyers out of the market. NAR chief economist Lawrence Yun said sales were uneven across the country but did increase nicely overall:

A big jump in existing sales in the South and West last month helped the housing market recover from a two-month sales slump,. The very healthy US economy and labor market are creating a sizeable interest in buying a home in early 2018. However, even as seasonal inventory gains helped boost sales last month, home prices – especially in the West – shot up considerably. Affordability continues to be a pressing issue because new and existing housing supply is still severely subpar.

realtors21march

Updated

Meanwhile Facebook shares are down another 2.5% at the open, in the wake of the Cambridge Analytica controversy.

Here is our latest story:

Wall Street makes uncertain start ahead of Fed decision

Ahead of the Federal Reserve decision - with rates expected to rise and investors seeking hints about further increases this year - Wall Street has slipped back at the open.

With technology stocks still under pressure, both from EU tax plans and the fallout from the Facebook controversy, the Nasdaq Composite has opened down 0.21%.

The S&P 500 has dipped 0.09% while the Dow Jones Industrial Average is down 27 points or 0.12%.

Neil Wilson, senior market analyst at ETX Capital, said:

Markets are pricing in a roughly 90% chance of a hike this week, the first of three or four anticipated this year. So the focus is on the dot plot and the accompanying language from chair Jay Powell. For risk, markets will want the Fed to hold off indicating 4 hikes in 2018 but keep up its confident assessment of the economy. This will in large part depend on how policymakers assess inflationary pressures – if they think inflation is coming they might accelerate the path of rate hikes. But there is a much bigger risk that the Fed sticks to three in 2018 but raises forecasts for 2019 and that could knock equities and give a boost to USD more than indicating four hikes in 2018 might...

Since the last meeting in December inflation has picked up but the pace has not really accelerated beyond the most bullish scenarios seen already...

Currently the median dot plot suggests three hikes this year, and there is a chance that this could rise to four. However, it is perhaps more likely that the dots show greater confidence in three hikes (i.e., the doves come round to consensus), than the centrists join the hawks and go for four. Nevertheless, with the key doves not voting this year (Neel Kashkari and Charles Evans), it would imply that the actual FOMC dots of voting members is higher...

Trade and tariffs will also be a big focus having weighed not insignificantly in the last week. It may be the wrong moment for the Fed to signal more hawkish policy when we look at the potential negative impact of tariffs on GDP. We wait to see whether policymakers comment on the impact of tariffs and a trade war on the economy.

Updated

The jump in UK wage growth means interest rates may rise soon, argues our economics editor Larry Elliott.

He writes:

Higher interest rates from the Bank of England have moved a decisive step closer after the latest official figures showed earnings growing at their fastest rate in more than two years.

The latest snapshot of the labour market from the Office for National Statisticsshowed that a record high level of employment and a drift from part-time to full-time work pushed up wages in the three months ending in January.

With inflation falling, the ONS said the squeeze on living standards that had dampened consumer spending over the past year had come to an end if bonuses were included in the yardstick used to calculate earnings.

Threadneedle Street’s monetary policy committee is meeting to discuss interest rates this week and the prospect of an increase in borrowing costs pushed up the pound on foreign exchanges. An increase in May is thought more likely than one this week....

More here:

Over in parliament, the prime minister has hailed today’s jobs figures.

Theresa May points out that employment is at a joint record high, the unemployment rate hasn’t been lower since 1975, and economic inactivity is at a record low.

No mention of the fact that the jobless total did rise in the last quarter, though...

Dr Carole Easton, chief executive of Young Women’s Trust, is concerned that younger female workers aren’t getting enough help to join the jobs market.

She points out that unemployment among women aged 16-24 rose by 21,000 in the three months to January. That means 151,000 young women are now unemployed and a further 340,000 young women are economically inactive and not in full-time education.

Dr Easton says young people need help to get the right skills, and should also benefit from the National Living Wage (which only applies to those over-25s today).

“21,000 more young women are unemployed, meaning nearly half a million are out of work. The Government must help young women into jobs to benefit individuals, businesses and the economy.

“Young women are telling us they want to work but they are getting shut out of the jobs market by employer discrimination, low pay and unaffordable childcare.

UK labour market stats

Interestingly, the number of people in work and the number counted as unemployment in Britain both rose in the last quarter.

You might expect them to move inversely - but instead, there was a fall in the number of ‘economically inactive’ citizens, suggesting people are being lured back into the jobs market.

Dr Heather Rolfe of the NIESR thinktank explains:

These figures indicate that, in the face of recruitment difficulties, including as a result of a large fall in net migration of EU citizens, employers are hiring people who have not been actively seeking work.

This might be seen as a positive sign, but this pool is likely to be limited”

UK jobs report: The political reaction

Britain’s Work and Pensions Secretary Esther McVey.
Britain’s Work and Pensions Secretary Esther McVey. Photograph: Ben Stansall/AFP/Getty Images

As usual, Britain’s unemployment report has split Westminster - with the government pointing to what’s going well, and the opposition focusing on the problems.

The Department for Work and Pensions highlights that the employment rate is now back at a record high (75.3%), with the unemployment rate back at its lowest level since Harold Wilson was prime minister in 1975 (at 4.3%).

Esther McVey, secretary of state for Work and Pensions, says the government is trying to get more people into work, adding:

“And from next month, we’ll be taking thousands more people out of paying tax and also increasing the National Living Wage, benefiting those on the lowest pay and making sure they keep more of what they earn.

“In fact by raising the National Living Wage we have ensured that the lowest earners have seen their wages grow by almost 7% above inflation since 2015.”

But her opposite number, Labour’s Margaret Greenwood, is concerned that the number of people out of work rose by 24,000 during the last quarter.

“With eight million people in working households living in poverty and the cost of basic essentials remaining high, the Spring Statement was a missed opportunity for the Government to take the urgent action needed.

“The Government has also failed to close the employment gap faced by women, disabled people and BAME groups, who have too often borne the brunt of austerity cuts.”

Ian Stewart, chief economist at Deloitte, has spotted another interesting angle in today’s jobs report: More people are quitting their jobs to move to another company.

That could drive wages growth higher, he reckons, as employers are forced to fight for labour.

“The post-Brexit squeeze on consumer spending power is easing. Low unemployment, a slowing flow of overseas workers into the UK and high levels of job vacancies are raising wage pressures and boosting job moves.

“The number of people resigning from one job to move to another fell in the wake of the financial crisis, but is now running at its highest level since 2001.

“The scene is set for a pickup in earnings growth this year.”

Resolution: Pay squeeze is finally ending

The Resolution Foundation has crunched today’s labour force statistics, and calculated that Britain’s pay squeeze is finally ending.

The think tank says that the official confirmation will come in a month’s time, when the ONS publishes the unemployment figures for November-February.

But today’s data shows that earnings are finally overtaking inflation, after almost a year of pain for hard-pressed households.

Resolution says:

Today’s figures show that real average weekly earnings fell by 0.2% in the three months to January, fell by 0.6% in the public sector, but were flat at 0 per cent in the private sector.

However, the Resolution Foundation pay projection shows that earnings growth is set to have returned to 0.1% overall, and 0.2% in the private sector, in the three months to February.

However, while private sector workers can celebrate, those in the public sector will continue to suffer falling real wages for a bit longer - until new pay deals are approved,

Stephen Clarke, Resolution’s senior economic analyst, warns that the squeeze on living standards isn’t over.

“Britain’s 12-month pay squeeze has finally ended, though public sector workers will have to wait until new pay settlements are agreed across the NHS, schools, the police and other parts of the public sector.

“While it’s a relief that pay packets are no longer shrinking, the outlook for anemic pay growth remains a huge living standards concern. Average pay is still lower than it was a decade ago, and an entire generation of young workers are still yet to experience the 3-4 per cent pay rises that were once the norm.”

Factory workers and builders are enjoying decent pay rises, says Geraint Johnes, research director at the Work Foundation and Professor of Economics at Lancaster University Management School.

He’s hopeful that the fall in real wages will soon end, especially as the UK economy is still creating jobs..

“Encouraging news on pay includes the 2.8% rise in total pay on the preferred measure, this being driven by gains in manufacturing and, particularly, construction.

Alongside the drop in consumer price inflation announced yesterday, this heralds an early end to the squeeze on real earnings. Meanwhile, the 182k rise in full-time employees in employment figure signals a labour market that continues to grow.”

Despite the pick-up in wages in recent months, UK workers are still poorer than before the financial crisis once you adjust for inflation.

The Office for National Statistics explains that in real terms:

  • average regular pay (excluding bonuses) for employees in Great Britain was £459 per week before tax and other deductions from pay, £14 lower than the pre-downturn peak of £473 per week recorded for March 2008
  • average total pay (including bonuses) for employees in Great Britain was £488 per week before tax and other deductions from pay, £34 lower than the pre-downturn peak of £522 per week recorded for February 2008

The ONS also provided this chart, which shows the impact of austerity on the wages of teachers, doctors, police officers and other public sector workers

UK pay

Updated

Jobless rate hits 42-year low

Britain’s unemployment rate has fallen back to 4.3%, its lowest level since 1975.

However, the number of people out of work has risen, by 24,000 to 1.45 million in the three months to January 2018 when compared with August to October 2017.

UK labour force stats

Employment rate hits record high

In another boost, Britain’s employment rate has risen to 75.3% in the three months to January.

That’s up from 74.6% a year ago, and the joint highest on record.

There were 32.25 million people in work, 168,000 more than for August to October 2017 and 402,000 more than for a year earlier.

Updated

UK wage growth accelerates

Breaking: Britain’s cost of living crisis is easing, as wages accelerate and close the gap with inflation.

Basic pay rose by 2.6% per year in the three months to January, up from 2.5% in the three months to December 2017.

If you include bonuses, then earnings jumped by 2.8% (again, up from 2.5% a month earlier). That’s the biggest jump since September 2015, according to the latest labour force statistics which were just released.

That means pay is catching up with inflation, which was 3% in January and only 2.7% in February.

The Office for National Statistics estimates that real wages have actually stopped falling (if you’re lucky enough to get a bonus, anyway).

Latest estimates show that average weekly earnings for employees in Great Britain in real terms (that is, adjusted for price inflation) fell by 0.2% excluding bonuses, but were unchanged including bonuses, compared with a year earlier.

More to follow....

Updated

Hannah Uttley of the Daily Mail sums up the scene:

Hundreds of jobs are also at risk at UK retailer New Look.

New Look’s creditors are meeting today to vote on a rescue deal to help its avoid administration.

Under the plan, New Look would shut up to 60 of its worst-performing stores, putting around 980 staff at risk of redundancy.

Mothercare seeking new bank funding

A Mothercare store on Holloway Road in London
A Mothercare store on Holloway Road in London Photograph: David Levene for the Guardian

Mothercare, the mother and baby chain, has also come under fierce pressure in recent days.

Shares in the company hit a record low yesterday, on fears that it is struggling to raise funds for a new turnaround programme. Three weeks ago, it warned it was in rescue talks with its banks, as it was on the brink of breaching its lending covenants

Mothercare has now issued a statement to the City, saying that these talks are ‘progressing constructively’.

It has also won a short-term reprieve from its lenders, who have agreed not to test these covenants next week. However, Mothercare now faces a two-month deadline to get new funding.

The company says:

“Mothercare expects those discussions to conclude before 17 May 2018, the scheduled date for the announcement of its preliminary results, and Mothercare’s lenders have agreed to defer the testing of our financial covenants due on 24 March 2018 accordingly. We will make further announcements as and when appropriate.

As previously indicated, we are also exploring additional sources of financing to support and maintain the momentum of our transformation programme and we are engaged in preliminary discussions on securing such additional financing.

Shares have risen by 9% this morning, to 17p. Back in July 2017 they were worth almost £3.

Carpetright to close stores as CVA looms

Carpetright CEO Wilf Walsh.
Carpetright CEO Wilf Walsh. Photograph: Martin Godwin for the Guardian

We also have news from another struggling retailer, Carpetright.

The floorings company has announced that it is exploring a company voluntary arrangement, which would allow it to shut some of its loss-making store and cut its rent bill.

Carpetright has also secured a £12.5 loan from one of its shareholders, Meditor. This will provide much-needed working capital while the company works through its problems.

It is in talks with its banks to relax its covenants, and is also considering raising up to £60m through a rights issue to shore up its balance sheet.

Wilf Walsh, chief executive officer of Carpetright, took a sideswipe at previous management for creating a sprawling portfolio of stores.

“The aggressive store opening strategy pursued by the Company’s previous leadership has left Carpetright burdened with an oversized property estate consisting of too many poorly located stores on rents which are simply unsustainable.

The Company has worked hard over recent years to address this legacy issue and reduce the size of its property estate, however many of these poor performing stores still have long leases to run, which has limited our ability to exit a meaningful number in the short-to-medium term.

Moss Bros’s CEO, Brian Brick, warns that 2018 will be a tough year for retailers:

In common with many UK retailers, the year ahead looks like being a very challenging one and we have taken action early to be sure we protect the underlying strength of the business. We do believe continued investment is essential to ensure we retain a sustainable point of differentiation and that we leverage our distinct position on the high street.”

Moss Bros issues profits warning

A Moss Bros shop in Covent Garden.
A Moss Bros shop in Covent Garden. Photograph: David Sillitoe for the Guardian

Moss Bros has hit shareholders with its second profits warning of the year.

The formal clothing and suit hire business has warned that profits for the current financial year, to January 2019, will be “materially lower than current market expectations”.

That’s quite a shocker, given Moss Bros is only two months into this financial year.

Moss Bros warned that it has suffered a “material” shortage of stock -- partly blamed on Brexit -- and a fall in visitors to its stores.

It says:

  • Following the consolidation of the Group’s supplier base in response to Sterling weakness, there have been material short-term issues with the resulting availability of stock. This stock shortfall across all categories has had a negative effect on sales in all retail channels and will continue to do so until late Spring.
  • Hire sales continue to be challenging, although the peak trading period for Hire is still to come. As such the Group has remained prudent in its outlook.
  • The reduction in store footfall that was experienced towards the latter part of December, has continued, reflecting a more cautious consumer environment.

Shares in Moss Bros have slumped by 30% in early trading.

Kingfisher warns of weaker sales in UK and France

A B&Q store in Ballymena, County Antrim.
A B&Q store in Ballymena, County Antrim. Photograph: Paul Faith/PA

DIY chain Kingfisher has sent a chill through Britain’s retail sector by reporting a fall in earnings, and warning that the UK market is tough.

Pre-tax profits at the company, which owns B&Q and Screwfix in the UK, have slumped by 10% in the last year to £682m.

Kingfisher warned that UK sales in the last quarter has been “softer”, with less demand for big ticket items.

Sales in France, where Kingfisher owns Brico Dépôt and Castorama in France, were “weaker and volatile”, it warns.

The City is unimpressed; shares in Kingfisher have slumped by over 7% in early trading to the bottom of the FTSE 100 leaderboard.

Véronique Laury, Chief Executive Officer, says Kingfisher benefitted from stronger sales in Poland.

“Our performance this year has been mixed, however, with solid growth at Screwfix and Poland, offset by continued weaker sales in France and some business disruption, principally reflecting product availability and clearance.

We are acting on the causes of this disruption, however next year will be another big year in our transformation plan. The pace of change is quick and impactful but necessary as we build the new ONE Kingfisher engine to support our ambition to be the leading home improvement company, based on putting customer needs first.

The outlook for our main markets is also mixed. The UK is more uncertain, France is encouraging yet volatile, whilst the market in Poland remains supportive.

Updated

The agenda: Markets brace for UK unemployment stats and US interest rates

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

Two big events will keep traders on their toes today.

First, we get the latest UK labour market figures for the three months to January. They may show that Britain’s cost of living crisis is easing. Earnings are tipped to have risen by 2.6% per year, closing the gap with inflation (which fell to 2.7% in February).

Economists also expect that the jobless rate will remain at 4.4%, having risen from 4.3% last month.

A strong jobs report could strengthen the pound.

Investors across the world will also be watching America’s central bank, the Federal Reserve.

The Fed is widely expected to raise US interest rates at today’s meeting, and will also release fresh economic forecasts and projections for future interest rate moves (its ‘dot plot’).

The Fed’s new chairman - Jerome Powell - will hold his first press conference, and there’s huge interest in his views.

Federal Reserve Chairman Jerome Powell.
Federal Reserve Chairman Jerome Powell. Photograph: Jacquelyn Martin/AP

Hussein Sayed, chief market strategist at FXTM, says:

Markets are almost certain that the Fed will be raising interest rates by 25 basis points later today, suggesting that a rate hike has been already priced in.

Instead, the focus will be on the accompanying statement, economic forecast, the dot plot and the Q&A session with Fed Chair, Jerome Powell.

Economic forecasts are likely to be revised after President Trump signed the $1.5 trillion tax bill into law last December. This should be reflected in the GDP growth forecasts for 2018 and 2019, but the magnitude of change is a hard guess. Similarly, inflation and unemployment estimates are likely to see upgrades from December’s projections. However, the key question remains - how does such a change impact monetary policy tightening in the next two years?

The answer to this question will be mirrored in the dot plot chart, and it is here where most market participants are divided which makes trading the Fed a tricky one. The latest dot plot, released in December’s meeting, shows three rate rises in 2018, followed by another two in 2019, and reaching a range of 3-3.35% by 2020.

An upward shift in the dots, whether in the short or long term, will have implications for the markets, and especially for the dollar, which has been in a downtrend since late 2016.

The agenda

  • 9.30am GMT: UK unemployment and wage statistics for November-January
  • 9.30am GMT: UK public finances for February
  • 6pm GMT: US Federal Reserve interest rate decision
  • 6.30pm GMT: Press conference with Federal Reserve chair Jerome Powell

Updated

Sign up to read this article
Read news from 100's of titles, curated specifically for you.
Already a member? Sign in here
Related Stories
Top stories on inkl right now
One subscription that gives you access to news from hundreds of sites
Already a member? Sign in here
Our Picks
The Hidden Threat in Your Pantry Why the FDA Is Recalling Ground Cinnamon
Baking a batch of cookies or sprinkling spice on your morning oatmeal feels entirely safe. You assume the dry powders sitting in your pantry are immune to the contamination issues that plague fresh meat and produce. Recent announcements from the Food and Drug Administration completely shatter that comforting illusion. A…
Grocery Coupon Guide
Grocery Coupon Guide
The Guide #237: Fab 5 Freddy, the street artist at the heart of New York’s creative zenith
A new memoir by Fred Brathwaite offers an insight into the city’s emerging underground scene in the 70s and 80s – and shows us the power of subcultures in difficult times
The Guardian - UK
The Guardian - UK
The two lives of Chuck Norris
“Chuck Norris doesn’t do push-ups. He simply pushes the world down.”
The Conversation
The Conversation
The Zendaya Romance The Drama Is Weirder and More Uncomfortable Than You Expect
A movie about marriage, memory, and the difficulty of knowing another person.
Reason
Reason
Simply the best: A connoisseurs guide to the finest Belgian chocolate this Easter
Eggs have been a long-standing symbol for Easter, but when did chocolate enter the holiday scene? Rebecca Spezzano has been on the streets of Brussels to discover the secrets of luxury handmade Belgian chocolate.
Euronews
Euronews
Nearly a century of wondering: The American UFO saga, in reality and in fiction
UFOs have intrigued people for decades, with sightings and investigations dating back to the first widely reported one in 1947
The Independent UK
The Independent UK
Fourteen days free
Download the app
One app. One membership.
100+ trusted global sources.
Download on the AppStore Get it on Google Play