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Zawya
2 days ago
- Business
- Zawya
Bank of England's long unwinding road: Mike Dolan
(The opinions expressed here are those of the author, a columnist for Reuters) LONDON - An expected cut that will take the Bank of England's key interest rate to 4% this week will be merciful relief for an economy badly in need of a lift. But overwhelming caution and a split among policymakers mean the easing cycle is set to be one of the shallowest and most drawn out in modern history. The BoE, like its central bank peers, has had a torrid five years, but with numerous home-grown twists and turns to boot. With Brexit just kicking in, the COVID-19 pandemic hit in 2020 - forcing massive BoE balance sheet support for government rescues during the lockdowns. A supply shock from the post-pandemic reboot combined with massive monetary and fiscal stimulus to sow the first double-digit UK inflation spike in over 40 years - exacerbated by soaring energy costs after Russia invaded Ukraine in March 2022 and complicated by a government-inspired bond market blowout later that year. The scramble to hike borrowing costs ensued as early as 2021 and the BoE has only slowly pared them back over the past year. And inflation is still not sustainably back to its 2% target, U.S. trade barriers are now rising sharply and policymakers and investors alike are struggling to determine exactly what the new normal is. Given this backdrop, the central bank's recent mantra of 'gradual and careful' seems reasonable. Deutsche Bank economists Sanjay Raja and Shreyas Gopal sought to quantify that caution this week by pointing out that the slow and shallow BoE easing cycle so far is already the third-longest since World War Two. If their forecast for the BoE's official bank rate - of four-quarter-percentage point cuts to 3.25% by next February - turns out correct, then this easing cycle will be the longest since 1945. What's more, they calculate that no rate-cut cycle that's lasted more than two quarters has delivered less easing than the current one. The Deutsche team reckon this is all consistent with the central bank's 'softly softly' guidance, but is also likely a "reflection of a very divided MPC (Monetary Policy Committee) following four years of above-target inflation." BoE policymakers broke three ways back in May when the central bank last cut rates - with votes for the majority decision, a deeper cut and no change - and some think that split could re-emerge this week. GROPING IN THE DARK Financial market pricing chimes with Deutsche's take and tentatively prices a "terminal rate" for the cycle at about 3.25%, paring back less than half the hikes that took the rate from the near-zero level to 5.25% during the 2021-2023 period. And that's a quarter-percentage-point higher than where markets think the U.S. Federal Reserve's policy rate will end up late next year. If the BoE policy rate does settle there, it would be a quarter percentage point above the average of the past 28 years of the central bank's operational independence - perhaps the clearest reflection of the big structural hit to both the domestic and global economies in recent years. But as the policymaker split is watched closely again on Thursday alongside the BoE's updated economic forecasts, some banks - such as Morgan Stanley - still assume the bank rate will eventually be eased much further to 2.75% by the end of 2026. To get there, the BoE will likely have to grope around in the dark a bit longer. In a speech last month, BoE policymaker Alan Taylor outlined his thoughts on the fabled "r-star" neutral real interest rate, the theoretical rate that neither spurs nor drags on economic activity and prices. His work suggested that a British r-star is now around 0.75%, which, after adding a 2% inflation rate, would imply that a BoE policy rate of 2.75% is indeed a reasonable landing point. That estimate hasn't changed much in 10 years, even though it's less than half of what it was on the eve of the 2007-2008 global banking crash. Indeed, Taylor underscored the very long-term trend of declining neutral rates in his presentation by highlighting a vast data set of interest rates from around the world clearly showing that interest rates had not just been falling steadily for the past 50 years, but the past 800 years. And yet even a BoE dove like Taylor knows how foggy it still is out there at the moment, especially given this year's expected UK inflation rebound and still punchy wage gains. "Optimism has faded and geoeconomic storms have blown in," he said before concluding on a philosophical note, "We know we will never see the end of the road, but we must always be looking for it." Central bankers everywhere may be trying to do just that, though few are likely seeing anything clearly right now. The opinions expressed here are those of the author, a columnist for Reuters -- Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn. Plus, sign up for my weekday newsletter, Morning Bid U.S.
Reuters
3 days ago
- Business
- Reuters
Bank of England's long unwinding road
LONDON, Aug 6 (Reuters) - An expected cut that will take the Bank of England's, opens new tab key interest rate to 4% this week will be merciful relief for an economy badly in need of a lift. But overwhelming caution and a split among policymakers mean the easing cycle is set to be one of the shallowest and most drawn out in modern history. The BoE, like its central bank peers, has had a torrid five years, but with numerous home-grown twists and turns to boot. With Brexit just kicking in, the COVID-19 pandemic hit in 2020 - forcing massive BoE balance sheet support for government rescues during the lockdowns. A supply shock from the post-pandemic reboot combined with massive monetary and fiscal stimulus to sow the first double-digit UK inflation spike in over 40 years - exacerbated by soaring energy costs after Russia invaded Ukraine in March 2022 and complicated by a government-inspired bond market blowout later that year. The scramble to hike borrowing costs ensued as early as 2021 and the BoE has only slowly pared them back over the past year. And inflation is still not sustainably back to its 2% target, U.S. trade barriers are now rising sharply and policymakers and investors alike are struggling to determine exactly what the new normal is. Given this backdrop, the central bank's recent mantra of 'gradual and careful', opens new tab seems reasonable. Deutsche Bank economists Sanjay Raja and Shreyas Gopal sought to quantify that caution this week by pointing out that the slow and shallow BoE easing cycle so far is already the third-longest since World War Two. If their forecast for the BoE's official bank rate - of four-quarter-percentage point cuts to 3.25% by next February - turns out correct, then this easing cycle will be the longest since 1945. What's more, they calculate that no rate-cut cycle that's lasted more than two quarters has delivered less easing than the current one. The Deutsche team reckon this is all consistent with the central bank's 'softly softly' guidance, but is also likely a "reflection of a very divided MPC (Monetary Policy Committee) following four years of above-target inflation." BoE policymakers broke three ways back in May when the central bank last cut rates - with votes for the majority decision, a deeper cut and no change - and some think that split could re-emerge this week. Financial market pricing chimes with Deutsche's take and tentatively prices a "terminal rate" for the cycle at about 3.25%, paring back less than half the hikes that took the rate from the near-zero level to 5.25% during the 2021-2023 period. And that's a quarter-percentage-point higher than where markets think the U.S. Federal Reserve's policy rate will end up late next year. If the BoE policy rate does settle there, it would be a quarter percentage point above the average of the past 28 years of the central bank's operational independence - perhaps the clearest reflection of the big structural hit to both the domestic and global economies in recent years. But as the policymaker split is watched closely again on Thursday alongside the BoE's updated economic forecasts, some banks - such as Morgan Stanley - still assume the bank rate will eventually be eased much further to 2.75% by the end of 2026. To get there, the BoE will likely have to grope around in the dark a bit longer. In a speech last month, BoE policymaker Alan Taylor, opens new tab outlined his thoughts on the fabled "r-star" neutral real interest rate, the theoretical rate that neither spurs nor drags on economic activity and prices. His work suggested that a British r-star is now around 0.75%, which, after adding a 2% inflation rate, would imply that a BoE policy rate of 2.75% is indeed a reasonable landing point. That estimate hasn't changed much in 10 years, even though it's less than half of what it was on the eve of the 2007-2008 global banking crash. Indeed, Taylor underscored the very long-term trend of declining neutral rates in his presentation by highlighting a vast data set of interest rates from around the world clearly showing that interest rates had not just been falling steadily for the past 50 years, but the past 800 years. And yet even a BoE dove like Taylor knows how foggy it still is out there at the moment, especially given this year's expected UK inflation rebound and still punchy wage gains. "Optimism has faded and geoeconomic storms have blown in," he said before concluding on a philosophical note, "We know we will never see the end of the road, but we must always be looking for it." Central bankers everywhere may be trying to do just that, though few are likely seeing anything clearly right now. The opinions expressed here are those of the author, a columnist for Reuters -- Enjoying this column? Check out Reuters Open Interest (ROI), your essential new source for global financial commentary. Follow ROI on LinkedIn. Plus, sign up for my weekday newsletter, Morning Bid U.S.
Mint
17-05-2025
- Sport
- Mint
RCB vs KKR clash delayed due to rain: Here is a list of IPL matches washed out at M Chinnaswamy Stadium in Bengaluru
The Indian Premier League 2025 match between Royal Challengers Bengaluru (RCB) and Kolkata Knight Riders has been delayed due to rain in Bengaluru. In the history of the Indian Premier League, an extremely small number of matches were affected by rain, and the M. Chinnaswamy Stadium in Bengaluru witnessed majority of those NO Result and fully abandoned matches. Here is a list of abandoned and no result matches in Bengaluru. The match was abandoned without a toss. The one point RCB received from the washout helped them to finish with 19 points and top the points table. RCB would have finished 2nd in the table, behind Chennai Super Kings, had they lost the match to RR. Once again, the match got abandoned without a toss. The one point RCB lost from the washout resulted in them getting knocked out of the playoffs race. Incidentally, CSK were the beneficiaries of the washout. Both CSK and RCB finished on 17 points, and CSK pipped RCB to the 4th place with a better Net Run Rate. RCB and RR were involved in a washed-out game for the second time in five years. RCB scored 200/7 in their 20 overs. RR's innings didn't start due to the arrival of rain. The two teams were awarded one point each. RCB finished third in the points table and RR finished fourth in the table. The two teams were separately involved in one more rain-affected match. RCB's final league match and the penultimate match of the league stage produced no result. Delhi Daredevils scored 187 in their 20 overs. Rain interfered after 7 balls of the second innings. RCB wouldn't have made it to the playoffs had they lost to DC and SRH defeated MI in the 56th and final league game. The match got abandoned without a toss. RCB managed to win only one of their 7 home matches in the season. The runner-up of the 2016 season finished 8th in the following season, accumulating just 7 points. Three out of the six abandoned matches in Bengaluru involve Rajasthan Royals as the opponents. This match was full of drama. RCB scored 62/7 in a five-over-per-side match. RR leg-spinner Shreyas Gopal took a hat-trick in the only over he bowled, dismissing Virat Kohli, AB de Villiers, and Marcus Stoinis. RR reached 41/1 after 3.2 overs. Rain arrived once again, and the match was called off for the time being. Neither team would have reached the playoffs had they won the match. RR and RCB finished 7th and 8th, respectively. Stay updated on all the action from the IPL 2025. Check the IPL 2025 Schedule, track the latest IPL 2025 Points Table, and follow the top performers with the Orange Cap and Purple Cap.
Yahoo
02-05-2025
- Automotive
- Yahoo
Petrol prices fall to lowest in four years ahead of bank holiday
Petrol prices have fallen to their lowest level in four years in a boost to drivers making the most of the bank holiday weekend for a getaway. The average litre now costs 134.1p, according to the RAC, down from just over 150p a year ago as the trade war drives down oil prices. Diesel now costs 140.6p per litre. It takes petrol prices to the lowest level since July of 2021, when the market was still recovering after the pandemic crushed costs. The latest drop comes after Donald Trump's trade tariffs raised fears of a global recession and sent the oil price tumbling on global markets. A barrel of Brent crude now trades for less than $62, down from $75 before the US president's 'liberation day' tariffs of April 2, and a high of $82 in January. On top of that the dollar has weakened, sending the pound up to $1.33 and making fuel cheaper for buyers in Britain as oil is traded in dollars. Shreyas Gopal, at Deutsche Bank, said the fall in both the dollar and oil prices had combined to make oil 30pc cheaper in the UK than it was at the peak in January. 'A similar story holds when looking at the 12-month contract for UK natural gas,' he said, predicting that lower pump prices would provide a boost to real disposable income. Figures from the RAC show fuel prices fell by 2p per litre last month, but the motorists' group argued that petrol and diesel would be another 4p lower if the full drop in oil markets had been passed on to drivers. Simon Williams, at the RAC, said: 'On one hand it's good news prices at the pumps fell for the second straight month, but on the other it's disappointing that retailers didn't drop their prices further considering how low oil and wholesale prices continue to be. 'Drivers right across the UK should really be benefiting from petrol being sold at an average of nearer to 130p and 136p for diesel. For now, only those in Northern Ireland are doing so. 'The data shows there's still scope for prices to be reduced by about 4p a litre, so we call on major retailers to reward their customers with some further significant forecourt cuts soon. 'Some are already selling both fuels for very low prices at particular sites – we'd just like to see this happening more frequently around the country. For example, both Asda and Sainsbury's are selling unleaded for under 125p a litre in Ipswich.' A drop in wholesale gas prices is also expected to lead to lower household bills when the energy price cap is next reset by the regulator. Analysts at Cornwall Insight predict that, if current trends continue, Ofgem will cut the cap by almost 9pc, equivalent to a £166 drop in the typical household's annual bill to £1,683. It marks a contrast with April's rise, which followed a spike in gas prices as a cold snap pushed up demand in February. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
