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Bank of England governor Andrew Bailey warns UK interest rate decisions will be ‘tight’ – business live | Business


Andrew Bailey: UK interest rate decisions will be tight

Newsflash: The governor of the Bank of England has warned that future interest rates decisions will be “tight”.

Andrew Bailey told an audience in Marrakech that there has been solid progress in the fight against inflation, but there is still work left to do (UK inflation fell to 6.7% in August, still above the BoE’s target of 2%).

Speaking at a meeting organised by the Institute of International Finance, on the sidelines of the IMF/World Bank’s gathering in Morocco, Bailey also points out that the Bank’s latest decision – to leave rates on hold at 5.25% – was a tight one.

Unusual introduction for Andrew Bailey at the IMF – he is compared to George Bailey, the protagonist “banker” (incorrect) of ‘It’s a Wonderful Life’ ????

— Andy Bruce (@BruceReuters) October 13, 2023

Last month, policymakers split 5-4, with a minority wanting another rate rise, despite concerns over the health of the UK economy.

But the majority favoured a pause, after 14 rate rises in a row had lifted borrowing costs to a 15-year high.

Going forwards, Bailey declares, decisions will continue to be tight.

That fits with comments from BoE chief economist Huw Pill, who said this week that rate decisions are becoming “finely balanced”.

Bailey endorses Pill’s comments, saying:

Our last meeting was such a tight one. And as my colleague Huw Pill said this week, they’re going to go on being tight ones.”

BoE’s Bailey: Solid Progress On Inflation But There’s Work Left To Do
– Policy Needs To Be Restrictive
– Recent Decision Was A Tight One
– UK Outlook Very Subdued
– Going Forwards, Decisions Will Continue To Be Tight

— LiveSquawk (@LiveSquawk) October 13, 2023

Key events

England and Wales insolvencies rise 17% year-on-year

The number of companies falling into insolvency across England and Wales has jumped 17% year-on-year, official data just released shows.

The number of registered company insolvencies in September 2023 was 1,967, which is 17% higher than the 1,688 recorded in September 2022.

It shows that firms are strugging, in the face of slow economic growth, inflationary pressures and high interest rates.

Insolvencies across England and Wales
Photograph: The Insolvency Service

There were 255 compulsory liquidations in September, and 1,576 creditors’ voluntary liquidations (CVLs) – where directors choose to shut a failed business. In addition there were 125 administrations and 11 company voluntary arrangements (CVAs).

The Insolvency Service says:

The increase in company insolvencies has been driven mostly by CVLs, while compulsory liquidation and administration numbers have increased from historically low numbers seen during and immediately after the pandemic, returning to close to 2019 levels.

Andrew Bailey: UK interest rate decisions will be tight

Newsflash: The governor of the Bank of England has warned that future interest rates decisions will be “tight”.

Andrew Bailey told an audience in Marrakech that there has been solid progress in the fight against inflation, but there is still work left to do (UK inflation fell to 6.7% in August, still above the BoE’s target of 2%).

Speaking at a meeting organised by the Institute of International Finance, on the sidelines of the IMF/World Bank’s gathering in Morocco, Bailey also points out that the Bank’s latest decision – to leave rates on hold at 5.25% – was a tight one.

Unusual introduction for Andrew Bailey at the IMF – he is compared to George Bailey, the protagonist “banker” (incorrect) of ‘It’s a Wonderful Life’ ????

— Andy Bruce (@BruceReuters) October 13, 2023

Last month, policymakers split 5-4, with a minority wanting another rate rise, despite concerns over the health of the UK economy.

But the majority favoured a pause, after 14 rate rises in a row had lifted borrowing costs to a 15-year high.

Going forwards, Bailey declares, decisions will continue to be tight.

That fits with comments from BoE chief economist Huw Pill, who said this week that rate decisions are becoming “finely balanced”.

Bailey endorses Pill’s comments, saying:

Our last meeting was such a tight one. And as my colleague Huw Pill said this week, they’re going to go on being tight ones.”

BoE’s Bailey: Solid Progress On Inflation But There’s Work Left To Do
– Policy Needs To Be Restrictive
– Recent Decision Was A Tight One
– UK Outlook Very Subdued
– Going Forwards, Decisions Will Continue To Be Tight

— LiveSquawk (@LiveSquawk) October 13, 2023

The rise in gas prices will cause some nervousness at the Bank of England, predicts Simon French, chief economist at Panmure Gordon (channelling a famous Alex Ferguson quote).

Squeaky bum time at the Bank of England given havoc that gas prices did to inflation forecasts last year. Gas futures have gone vertical – a direct feed into the November CPI forecast. A week ago, gas looked like a ???? for 2024 CPI, offsetting oil ????. Not the case this morning ???? pic.twitter.com/hdtgKc1mKd

— Simon French (@shjfrench) October 13, 2023

Back in the energy market, UK gas prices have risen further this morning.

The day-ahead UK gas price has gained 6.7% to 128p per therm, up from as low as 62p earlier this month (when warmer weather meant less demand for heating, and before supply worries hit the market).

Norway, Europe’s largest gas supplier, says it is is closely monitoring the probe into the damage to the Baltic Sea pipe between Finland and Estonia.

A spokesperson for Gassco, which operates Norway’s gas pipeline network, told Reuters:

“We are now in close dialogue with the relevant security authorities and are following the situation closely to assess relevant security measures,”

CMA’s Cardell: Other businesses should not copy Microsoft’s approach

Sarah Cardell, the head of the Competition and Markets Authority, has defended the CMA’s decision to drop its opposition to Microsoft’s takeover of Activision.

Cardell insists the CMA was prepared to defend its initial decision in court, before Microsoft made a “major concession” and “fundamentally restructured the deal” by licensing Activision’s cloud streaming rights outside of the European Economic Area to Ubisoft.

Otherwise, Cardell tells the Today programme, the combination of Microsoft and Activision would have led to “real problems in cloud gaming”, given Microsoft’s strong position in cloud gaming through its Xbos and Windows platforms.

Cardell adds that other businesss should not emulate Microsoft’s approach, saying:

My very clear advice to businesses looking at this, is that that is not the best way to engage with the CMA.

There is nothing about this restructured deal that Microsoft couldn’t have brought forwards months ago.

That would have saved Microsoft, frankly, a lot of time and a lot of money, and led to the same outcome that we have now a lot sooner in the process.

Edward Gardner, a commodities economist at Capital Economics, explained yesterday that concerns over a wider conflict in the Middle East are pushing up gas prices:

“Gas prices have risen due to lower supply, but, arguably more importantly, risks to supply.

“Perhaps the bigger concern is that the Hamas-Israel conflict could morph into a regional conflict.”

More here, on the FT.

Microsoft has welcomed the CMA’s decision to give its (rejigged) takeover of Activision the green light.

The tech giant says it was “grateful for the CMA’s thorough review and decision”.

Vice Chair and President Brad Smith said.

“We have now crossed the final regulatory hurdle to close this acquisition, which we believe will benefit players and the gaming industry worldwide”.

Back in April, Smith had blasted the CMA’s original decision to block the deal as “bad for Britain”.

UK competition watchdog approves revised $69bn Microsoft-Activision deal

The world’s largest ever video games deal has moved close to completion this morning, as the UK competition regulator approves Microsoft’s $69bn (£54bn) acquisition of Activision Blizzard.

The UK’s Competition and Markets Authority has announced that it will now allow the deal, after Microsoft adjusted it following the CMA’s initial decision to block it.

The tech giant will now sell Activision Blizzard’s cloud gaming rights outside Europe to Activision’s French rival Ubisoft, which addresses the CMA’s concerns that takeover would hurt competition.

The CMA says:

The new deal will stop Microsoft from locking up competition in cloud gaming as this market takes off, preserving competitive prices and services for UK cloud gaming customers. It will allow Ubisoft to offer Activision’s content under any business model, including through multigame subscription services.

It will also help to ensure that cloud gaming providers will be able to use non-Windows operating systems for Activision content, reducing costs and increasing efficiency.

Here’s the full story:

Introduction: European gas price rise on geopolitics and supply fears

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

European gas prices have climbed to their highest level since March as geopolitical risks, shortage fears, and colder weather grips the market.

The Israel-Hamas war and damage to the pipeline between Finland and Estonia are both causing disruption to the gas sector.

And with the first Arctic cold blast into Western and Central Europe forecast for this weekend, more households will be flicking on the thermostat as temperatures drop.

The benchmark month-ahead European gas price has climbed to its highest level since late February, closing at €53.29 per megawatt hour – up from €25 per megawatt hour in July.

UK gas prices have also gained this week, with the day-ahead price the highest since early April at 121p per therm, and the month-ahead contract the highest since mid-March at 133p per therm.

Gas climbed at the start of this week, as Israel suspended production at the Tamar gas field in the Eastern Mediterranean due to security fears.

The mysterious damage to the Balticconnector pipeline and parallel Estlink telecommunications cable between Estonia and Finland this week has also shaken the market, with Helsinki saying last night that the involvement of a state actor in this job cannot be ruled out.

Rising gas prices will squeeze consumers and businesses this winter, and could also undermine central bank efforts to bring inflation down to target.

Jim Reid of Deutsche Bank says:

The latest moves follow several concerns about global supply over recent days, as well as forecasts showing much cooler weather in Europe over next week.

Fortunately, gas prices are still some way beneath their levels from this time last year, and European gas storage is also fuller than at this point in 2021 and 2022, but this is still a concerning trend at a time when recent CPI prints have already been returning the focus back to inflationary pressures.

European month-ahead gas prices
Photograph: Refinitiv

Europe is now facing its second winter without much of the gas it used to receive from Russia, before the Ukraine war.

Bloomberg says:

Some forecasts suggest Europe will have a relatively warm winter, which should reduce gas needs. But the energy crisis is still far from over, and a cold snap is set to hit in the coming days.

Mounting threats to gas supply are sending most fuel prices higher as fear takes hold of the market just ahead of the first signs of winter, with natural gas in Europe hitting the highest level in seven months https://t.co/n1T2cew6oQ

— Bloomberg (@business) October 13, 2023

The agenda

  • 7.45am BST: French inflation report for September

  • 8.45am BST: IMF/World Bank hold plenary session of their annual meeting in Marrakech

  • 10am BST: Eurozone industrial production for August





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