
RBNZ Q2 sectoral factor inflation model at 2.8% y/y
The country's official statistics agency earlier in the day released figures that showed annual inflation came in at 2.7% in the second quarter, its highest in a year, leading markets to narrow the odds on a rate cut next month given weakness in the broader economy.
Both measures are closely watched by the RBNZ, which has a monetary policy goal of keeping inflation within its target range of 1% to 3%.
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Daily Mail
25 minutes ago
- Daily Mail
Bond traders smell trouble: Reckless Reeves could spark a full-blown financial crisis, says MAGGIE PAGANO
There are times when the numbers published by the Office for National Statistics on the state of the economy are so mind-boggling that they become meaningless. Figures for June on the level of government borrowing are a case in point. On our behalf, Labour borrowed some £20.7billion last month – £6.6billion more than in the same month last year. It is the second highest June borrowing since records began, and was only eclipsed in 2020 at the height of the pandemic. This takes borrowing in the first three months of the financial year to £57.8billion, and if the forecasts are to be believed, suggests the total tally for this financial year will be £130billion, give or take a billion or two. That is more than any government department spends, other than health. Perhaps an extra £6billion a month doesn't sound too much. But here's a way of putting these numbers into some sort of perspective. How long do you think it takes to count to a million? If you take one number at a time – about a second each – it would take an average person 11 and a half days of continuous counting, or around 278 hours. Now estimate how long it takes to count to a billion. On the same non-stop basis, it would take someone an astonishing 31.7 years, and that's without eating or sleeping. So for June's extra £6billion, someone would have to count for roughly 192 years. That gives some context for the scale of the problems facing our public finances. If the economy was growing – and living standards rising – as a consequence of improved productivity, such a whopping debt mountain might not be such a problem. But it's not. Quite the reverse. June's horrifying monthly increase is because government spending outstripped tax receipts while the cost of interest payments on the country's nearly £3 trillion debt nearly doubled. What's more, the £16.4billion cost of interest payments on the debt was the second highest for June since 1993 due to inflation. This was £8.4billion more than in the same month last year, or put another way, £550million a day and more than £22million an hour. As Office for Budget Responsibility chairman Richard Hughes pointed out recently at the Treasury select committee, we have the sixth-highest debt, fifth-highest deficit and third-highest borrowing costs among 36 advanced economies. Which is why the UK gilt market is so skittish. Traders smell trouble ahead, particularly after the Government failed to get through even the most minor reforms to the welfare budget. Gilt yields on the 30-year benchmark government bond have been above 5 per cent for most of the year, breaking the 5.5 per cent mark last week – far higher than during the Liz Truss reign. Yet when Labour came to power, yields were below 4.5 per cent. Capital Economics claims that higher UK gilt yields since March have already cut the Chancellor's so-called 'fiscal headroom' from £9.9billion to £6.7billion. In the scale of things, the difference now comes down to a rounding error. While it is true that the cost of money has risen globally, the markets forecast that UK borrowing costs have further to climb, that the country is an outlier. What a mess. Rachel Reeves will need to whip up another £20billion to balance the books. But she doesn't have many options left, having lost the fight over cuts to the welfare budget. Her only choice is to raise taxes again. This in turn will scupper growth, leading to a state of stasis, if not a full-blown financial crisis. Trump's win Laugh all you like at Donald Trump's outlandish tariff threats but they often land him the prize. The President's latest win is the promise by AstraZeneca to invest $50billion in the US by the end of the decade as part of its plan to reach $80billion of sales. Rather than face potential tariffs of 200 per cent on imported drugs, the pharmaceuticals giant is going to build a new drug manufacturing factory for chronic diseases in Virginia. Having already lost out on AstraZeneca's plan to build a plant in the UK because of government incompetence, the powers that be must do all they can to ensure that the company will keep its primary listing in London and not switch to New York. That would be giving Trump too much of a win.


Daily Mail
3 hours ago
- Daily Mail
QUENTIN LETTS: With his drip dry suburban ways, there's something furtive about the Governor
Bank managers are often thought stodgy presences. But as Andrew Bailey demonstrated at the treasury select committee, they are crazily optimistic loan sharks. Their purpose in life is to persuade happy people to borrow money, which frequently brings misery. 'It'll be fine,' they say. Bank managers are maniacs. Outwardly Mr Bailey is unexciting. They're always the most dangerous. The sober socks, bland suit, Pooterish manner, and a retinue of six clerical mice who traipse after him with earnest haircuts and dark shoes: it is a brilliant disguise. We think, 'he'll be safe', but we'd be safer being driven home from an all-night bender by the late Ayrton Senna. Mr Bailey is governor of the Bank of England. His time in charge has so far seen the mad printing of money, blindness to inflation after lockdown and a regulatory laxness that hastened the Truss government's destruction. Yesterday he was asked if Rachel Reeves was borrowing too much. Noooo, said Mr Bailey. Everything's under control. He slipped easily into jargon mode, burbling that yield curves were steeper across the world. As he did this he narrowed his eyes a little to convey shrewd expertise. He placed his elbows on the witness table and touched the skin of his brow, quite the expert intellectual. Carry on borrowing, Chancellor. It's all going swimmingly. That was his siren song. Dame Meg Hillier (Lab), chairman of the committee, was surprised. 'You sound unconcerned,' honked Mother-Goose Meg. Mr Bailey, suppressing just a hint of indigestion: 'I'm not unconcerned. It's reflective of conditions. There is an uncertainty in geopolitics, I'd say.' Dame Meg boggled a bit at his calm tone. We were talking here about trillions of pounds and an interest bill that could bankrupt us. Mr Bailey soothed Dame Meg with a not-quite convincing smile. He noted that the market capitalisation of a single US firm is now greater than Britain's gross domestic product. Was that meant to be reassuring? Unlike his talcum-powdered predecessor Mark Carney this Bank governor is not a magnetic figure. When he enters a room, people do not hush. When Mr Carney shimmered down a corridor, you could almost hear Sade's 'Smooth Operator'. Mr Bailey, with his crinkly hairdo and drip-dry, suburban ways, lacks charisma. He fiddles with his chin and neck when talking. His fingers twiddle with a slender ballpoint pen. There's something not quite right about him. Something flawed. Furtive. When Ms Reeves first started to meet him, she possibly suspected that she was the senior partner in the relationship. Now, as she looks at our economy going down the plughole, she must wish she had never listened to his burbling reassurances. He was accompanied by two external members of the Bank's financial policy committee. Carolyn Wilkins, a Canadian policy wonk, was largely inaudible. Prof Randall Kroszner, known as 'Randy', sat on the very edge of his chair, his spine ramrod straight. Randy was Norman R. Bobins professor of economics at Chicago university, a director of the George J. Stigler Center for the Study of the Economy and the John M. Olin visiting fellow of law at Chicago law school. Randy turns left on aeroplanes. We possibly need to keep Rachel Reeves away from such people. It being the last day of term, Westminster was pretty empty. The education committee was holding an inquiry about truancy. Jolly bad luck. It meant most of them had to turn up. And in the Commons chamber Wes Streeting took health questions. Wes is already quite bronzé. Not a fleck of grey taints his inky, modishly ridged fringe. Add a rich, blue suit and just a hint of tummy. During longueurs he effortlessly attended to his mobile telephone. He paid handsome tribute to his Tory shadow, Edward Argar, who is retiring from the front bench. And he relished talking about the resident doctors' strike, which we must all hope he wins. The Starmer Government has had a hellish first year but little Wes is loving life.


Reuters
3 hours ago
- Reuters
Trump says Fed's Powell will be out in 8 months, calls him a 'numbskull'
WASHINGTON, July 22 (Reuters) - U.S. Federal Reserve Chair Jerome Powell is a "numbskull" who has kept interest rates too high, but he will be out in eight months, President Donald Trump said at a news conference on Tuesday. "I think he's done a bad job, but he's going to be out pretty soon anyway. In eight months, he'll be out," he said from a meeting at the White House with Philippine President Ferdinand Marcos Jr. Powell's term as Fed chair runs through May 15, and he has repeatedly said he will not leave the post early. Eight months would mean Powell would remain in place until mid-March; it was not immediately clear why Trump picked that time frame. Trump has been hammering at Powell for months for not cutting rates and has frequently raised the possibility of ousting him, while also saying that firing him would be "unlikely." Lately, the White House has intensified Trump's pressure campaign, launching a review of the Fed's renovation of two buildings in Washington which they say are inappropriately lavish and may not have followed planning protocols, charges that the Fed vigorously rejects. Treasury Secretary Scott Bessent on Tuesday repeated his call for a "big internal investigation" of the Fed's non-monetary policy operations. Economists warn that efforts to push the Fed to loosen monetary policy could actually have the opposite effect. They point to hyperinflation in countries from Argentina to Zimbabwe as examples of what can happen when politicians exert influence on central bank rate-setting. Some see evidence in financial markets that the Trump administration's constant attacks on Powell are eroding confidence in the Fed's ability to achieve its dual goals of price stability and maximum employment. "Market participants seem to agree that the risk to Fed independence is rising," Goldman Sachs economist Jan Hatzius wrote late on Monday, pointing to a rise in longer-term inflation expectations as captured in 5-year 5-year forward inflation swaps, which measure expected inflation over five years beginning five years out. "A further increase could make Fed officials more reluctant to cut," Hatzius said. If inflation expectations rise, the thinking goes, actual inflation is likely to follow. Powell and other Fed officials believe that longer-term inflation expectations remain stable, but they say they are watching nearer-term measures closely, particularly with tariffs likely to increase upward price pressures as companies pass on more of the costs to consumers. "Efforts by the administration to push the (Fed) into an accommodative monetary policy stance that would not be justified by macroeconomic conditions would likely backfire with higher long-term rates, higher inflation expectations, and ultimately the need for a tighter monetary policy stance," Barclays economists wrote on Tuesday. On Tuesday Trump repeated his view that the policy rate should be 3 percentage points lower than it is now. The central bank's policy-setting Federal Open Market Committee is nearly universally expected to leave the policy rate in its current range of 4.25%-4.50% when it meets next week, as policymakers wait to see how inflation and employment react to tariffs. "Our economy is so strong now, blowing through everything. We're setting records," Trump said on Tuesday. "But you know what? People aren't able to buy a house because this guy is a numbskull. He keeps the rates too high, and is probably doing it for political reasons." Mortgage rates had increased last year even as the Fed cut its policy rates by a total of 1 percentage point, tracking U.S. Treasury yields, which surged amid economic resilience and worries about Trump's proposed policies. Bessent, at the same meeting, raised a different complaint against the Fed. "The Fed has had big mission creep, and that's where a lot of the spending is going," Bessent said. "That's where, why they're building these new, or refurbishing these buildings, and I think they have got to stay in their lane."