Below is an extract of a post published on Guardian titled "Fed defies Trump by indicating it will push ahead with more rate rises - business live"
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US central bank discussed raising borrowing costs to ‘modestly restrictive’ levels, minutes of last month’s meeting show Latest: Fed minutes show further rate hikes are expected Official’s discussed raising rates to ‘restrictive’ levels Fed worries about trade wars and tax cuts 8.22pm BST Here’s the Fed’s dilemma – US inflation hit a six-year high this summer, bolstering the case for rate hikes. But it has been dipping since…. Everyone saying the Fed minutes were hawkish. Of course the minutes were hawkish. When the Fed met, inflation had just started falling from a 6.5 year high. pic.twitter.com/y3Wlp3wg0e 8.18pm BST Marc-André Fongern of MAF Global Forex says the Federal Reserve remains focused on its mandate: For now, the Fed has made it clear that they are focused on their agenda despite rising Presidential pressure on their rate decisions. @etrade #FED #FOMC #USD $DXY #Forex pic.twitter.com/23zHD289Dw 8.16pm BST CNBC also reckon the president won’t be happy that the Fed is sticking to its guns on future interest rate hikes: Federal Reserve officials remain convinced that continuing to gradually increase interest rates is the best formula to preserve a steady economy, according to minutes released Wednesday of the central bank’s most recent policy meeting. That may not please President Donald Trump, who has been vocal in his criticism of the central bank’s actions. BREAKING: @CNBC Fed points to more rate hikes amid criticism from Trump https://t.co/nd1cPP4Zpl 8.01pm BST Some cartoon-based reaction: No big surprises in #FOMC as I see it. Fed will continue to hike as long as everything moves in the right direction pic.twitter.com/5n5rRdgRZn 7.58pm BST There’s no response to the Fed minutes from the White House yet. But yesterday, Donald Trump said the Fed was his “biggest threat”, because it was raising rates too fast. So we can probably guess his reaction…. 7.51pm BST Paul Ashworth of Capital Economics has read the minutes, and says: Overall, nothing here to change our view that the Fed will persist with its “gradual approach” of hiking by 25bp each quarter. That is until mid-2019, when we expect a drop in GDP growth to below-potential to force the Fed to the sidelines. 7.50pm BST You can read the minutes of the Federal Reserve’s September meeting online here. They show that the Fed expects to press on with interest rate rises in the coming months, despite Donald Trump’s vocal concerns that it is tightening too fast: With regard to the outlook for monetary policy beyond this meeting, participants generally anticipated that further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term. This gradual approach would balance the risk of tightening monetary policy too quickly, which could lead to an abrupt slowing in the economy and inflation moving below the Committee’s objective, against the risk of moving too slowly, which could engender inflation persistently above the objective and possibly contribute to a buildup of financial imbalances. Participants offered their views about how much additional policy firming would likely be required for the Committee to sustainably achieve its objectives of maximum employment and 2 percent inflation. A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level in order to reduce the risk of a sustained overshooting of the Committee’s 2 percent inflation objective or the risk posed by significant financial imbalances. A couple of participants indicated that they would not favor adopting a restrictive policy stance in the absence of clear signs of an overheating economy and rising inflation. 7.43pm BST Shares in New York have dipped since the Federal Reserve minutes hit the wires. Traders have noted that the Fed is planning to press on with interest rate hikes, which could weaken growth and push up unemployment. 7.37pm BST There’s no explicit mention of Donald Trump or the White House in the minutes of the Fed’s last meeting. But the US president’s tax cuts, and his deepening trade spat with China, are clearly a concern. Some participants commented that trade policy developments remained a source of uncertainty for the outlook for domestic growth and inflation. The divergence between domestic and foreign economic growth prospects and monetary policies was cited as presenting a downside risk because of the potential for further strengthening of the U.S. dollar; some participants noted that financial stresses in a few EMEs could pose additional risks if they were to spread more broadly through the global economy and financial markets. With regard to upside risks, participants variously noted that high consumer confidence, accommodative financial conditions, or greater-than- expected effects of fiscal stimulus could lead to stronger-than-expected economic outcomes. There’s no mention of Trump’s polemics in the minutes of the most recent Federal Reserve meeting. Trump’s policies, however, are very much on the Fed’s mind:https://t.co/CYCjtuVadx 7.11pm BST Here’s the Financial Times’ take on the Fed minutes that were just released: Federal Reserve policymakers said they will forge ahead with further rises in interest rates, with some talking of pushing borrowing costs into restrictive territory, as the central bank seeks to prevent inflation from overshooting its target. Despite outspoken criticism of rate rises from President Donald Trump, a number of Fed policymakers said in their September meeting that they thought it may become necessary to temporarily boost rates above levels they expect in the longer run. This would prevent inflation from getting too hot and ward off risks of financial excesses, the central bankers said. Fed officials debate pushing rates into ‘restrictive territory’ https://t.co/dDBonfvUob 7.08pm BST Newsflash: The Federal Reserve has discussed raising American borrowing costs to ‘restrictive levels’. The minutes of last month’s Fed meeting show that officials discussed how much higher interest rates could go. “A few participants expected that policy would need to become modestly restrictive for a time and a number judged that it would be necessary to temporarily raise the federal funds rate above their assessments of its longer-run level.” FOMC September Meeting Minutes say that all policy makers expressed the view of raising rates by 25 bps< < https://t.co/5TB4n2hS9Z 6.42pm BST 6.06pm BST Fiona Cincotta, senior market analyst at City Index, points out that tonight’s Fed minutes were written before the markets wobbled last week. As such, they may be less useful than investors would like: The dollar was trading higher ahead as the release of the FOMC minutes moved into the spotlight. Given all that has happened since the meeting, there is a high chance that the minutes are in fact out of date. That said, traders will still scrutinize them closely for any hints as to when the next rate rise will be (December) and what the Fed has in store for 2019. 6.02pm BST Wall Street is now clawing back some of those early losses. The Dow is still down, but only 28 points or 0.1%, while the S&P 500 and the Nasdaq are flat. We love comebacks, and the market has pulled about even after a decent drop in the early going, with the Dow down over 300 points at its low-point. Earnings continue to look solid, with #Netflix leading the way, with shares up 4%. Fed minutes still to come. 5.16pm BST Steve Webb of Royal London Asset Management has called on the government to clarify how the UK pension ‘triple lock’ actually works. As I covered earlier, there was confusion over which month’s earnings figures would be used to set pension increases in 2019. At one stage yesterday, journalists and Royal London itself were told that August’s figures would be used, before a u-turn this morning (once it was clear that wages, not inflation, would be the key). “It is annoying that such uncertainty exists and we need DWP to give clarity on what figures it uses to calculate the triple lock. We calculate that using July figures instead of August leaves pensioners £100m worse off. It doesn’t make sense that out of date data should be used.” 4.58pm BST Here’s something new to worry about - the Bank of England fears that too much money is being lent to indebted companies, often at high interest rates (reflecting its riskiness): Related: Bank of England raises alarm over surge in high-risk lending 4.55pm BST European stocks markets have closed in the red, with the French CAC and German DAX both down around 0.5%. Auto makers had a bad day, after figures showed a 24% tumble in EU car sales last month (as manufacturers struggled to meet new emissions rules). 4.27pm BST Shares in US housebuilders are having a bad day, after disappointing construction data. The number of new housing projects dropped by 5.3% in September. Hurricane disruption is partly to blame, but this is a bigger fall than expected. Construction activity in the South fell by the most in nearly three years, probably due to Hurricane Florence. Homebuilders stumble again. Down 6 of 7 days. Down 9.4% for October.@CNBC @SquawkStreet pic.twitter.com/y7NxHeTIdG 4.15pm BST Back on Wall Street, today’s sell-off is gathering more pace. The Dow is now down 220 points or 0.8% at 25,577, handing back a chunk of yesterday’s big rally. 3.12pm BST Here’s our news story about the latest UK inflation figures: UK inflation dropped further than expected last month as the falling price of meat and chocolate helped reduce some of the pressure on cash-strapped British consumers. The Office for National Statistics said the consumer price index (CPI) fell to 2.4% in September from 2.7% the previous month, confounding City analysts’ forecasts for a more modest reduction to 2.6%. Related: Cheaper chocolate and meat drive down UK inflation in September 3.11pm BST Netflix is defying the downward gravitational pull of Wall Street. “Despite posting a weaker-than-expected set of figures in Q2, we believe the numbers for this quarter show Netflix has the guile and ingenuity that one would expect from a company of its stature. “Q2’s numbers were below Street estimates, but Netflix took a conscious and sensible decision to take a step back from releasing new content and the latest seasons of its most popular shows as it correctly predicted that the FIFA World Cup would impact sales and viewership. 2.54pm BST Consumer goods, technology, mining and industrial companies are all dropping in New York. IBM is the biggest faller on the Dow (now down 6.6%), followed by Home Depot (-2.5%). 2.37pm BST Shares in New York are dipping at the start of trading. The main indices have opened lower, with the Dow falling around 100 point at the open. 1.55pm BST Property partner at Pinsent Masons, Kevin Boa, says a ‘perfect storm’ of problems combined to drive UK house price inflation down. They includes: Interest rates increases, government policy changes that have shrunk the buy to let market, Brexit upheaval and the reduction in EU and overseas buyers, particularly in London all contribute to this decline. Despite this, there remains a huge undersupply of housing which will only become more acute over time.” 1.22pm BST Back in the markets, Wall Street is expected to open cautiously in just over an hour’s time. The Dow is being called down 100 or so points, having surged by almost 550 yesterday, in the biggest one-day rally in seven months. US Opening Calls:#DOW 25682 -0.42%#SPX 2804 -0.13%#NASDAQ 7299 +0.36%#IGOpeningCall 12.52pm BST Policymakers at the Bank of England will be relieved to see UK inflation dropping last month. Weakening price pressures take pressure off the BoE to consider raising interest rates any time soon. So with Brexit approaching a crescendo, the Bank can sit tight, even though wages are rising. “The figure came a day after encouraging wage growth figures, which showed pay rose by 3.1% in the three months to August, the fastest pace in nearly a decade. This is positive news for consumers, as it should, in theory, increase their spending power. This, in turn, is good news for the UK economy which relies heavily on consumer spending. “The inflation figure will also come as a relief to the Bank of England, which will be under less pressure to raise rates in the near future. It now appears increasingly unlikely that the central bank will raise rates again before the terms of the UK’s Brexit deal with the EU are clarified. On the other hand, if the trend of real wage growth continues, then we might expect rising inflation in the longer term.” 12.35pm BST Heads-up: Gatehouse’s savings products are actually more generous than I wrote earlier (I accidentally used an old chart). Their one-year fixed savings account has an expected profit of 1.9%, while the five-year fixed account is 2.68%. 12.12pm BST The TUC are urging the government to end the freeze on working-age benefits, and raise them in line with inflation again. TUC General Secretary Frances O’Grady says: “Although prices are rising, support for working families is still frozen. Too many households can’t make ends meet without being forced into the red. “If Theresa May is serious about her claim that austerity is over, then the government must reverse unfair cuts to working age benefits.” Benefits used to be kept in line with inflation. But most have been frozen since April 2016, & capped for years before that. This means that, in real terms, those on benefits have been receiving less and less each year, especially during this period of high inflation. pic.twitter.com/CIllFKhiEX This is the last year in a four year freeze. In total, 10.4 million households have seen a £420 reduction in their benefits between 2015-16 and 2019-20, and the Exchequer has saved £4.4 billion. pic.twitter.com/Ded7U09ErZ 11.54am BST In other news, UK house prices growth has fallen to its lowest level in five years - but still faster than inflation. The Office for National Statistics reports that average house price growth dropped to 3.2% per year in August, down from 3.4% in July. That’s the slowest increase since August 2013. 11.36am BST The Triple Lock confusion has been resolved! The Department for Work and Pensions have told us that the government will used July’s earnings figures when setting pension increases. 11.34am BST Although wages are rising faster than the cost of living, the same isn’t true of saving rates. Even the best one-year fixed term bank accounts listed on Money Supermarket are only offering around 2% per year, below September’s inflation rate. “Savers will be relieved that inflation has finally fallen after three successive rises. “However, despite this good news, the truth is that in the current low interest rate environment savings struggle to keep pace with the rising cost of living. 11.34am BST Along with August’s average earnings boost, UK inflation drop last month helping to lift real wage growth https://t.co/DfVlDCZeDg @BruceReuters pic.twitter.com/lPfK798z0L 11.00am BST Important point: Confusion is swirling about which earnings figure the government will use to set the Triple Lock for state pensions next year. In the past, it has used annual total wage growth for the quarter to July, which was 2.6%. When we asked DWP press office yesterday they said they would use the August earnings figure which is 2.7%. I agree that past practice has been to use the July figure. @JosephineCumbo if they do use out-of-date data, it will cost pensioners around £100m per year…. I was working off the July number as they’d used that in the past DWP told me yesterday that August’s earnings figures will be used for the Triple Lock. 10.44am BST Tom Selby, senior analyst at AJ Bell, says pensioners should welcome the Triple Lock (despite the confusion over exactly which earnings figure will be used): “Today’s figures will provide a welcome income boost to millions of people currently in receipt of the state pension. Those who get the flat-rate amount will see their annual payment increase by over £220 in April next year, a smaller increase compared to last year but still not to be sniffed at. With inflation returning to the economy, the value of protection against rising prices is not to be underestimated. “In the context of the triple-lock, it’s worth noting the guarantee will cost the Government nothing compared to the earnings and inflation ‘double-lock’ some have proposed. It is only in a low inflation, low earnings environment that the promise begins to bite. 10.22am BST British retailers are gritting their teeth at the prospect of even higher business rates. They are due to rise next year in line with today’s inflation reading, meaning an extra £180m total bill according to the British Retail Consortium. “These figures confirm that the retail industry, which is under significant pressure from public policy and a consumer and technology-led transformation, will face yet another eye-watering rise in business rates next April. The burden of the current business rates system, which is in urgent need of reform, is leading to store closures and hindering the successful reinvention of the retail industry. “Ministers need to act to address this £180m increase in retailers’ already unsustainable business rates bill, along with other public policy burdens which retailers are struggling to absorb the cost of. 10.16am BST Any inflation is bad news if your benefits are capped: NB September’s inflation figures are used to uprate benefits, so a smaller increase than expected this year. And working age benefits remain frozen, so that’s an effective 2.4% real terms cut… The @ONS announced today that UK inflation is 2.4%. There’s a freeze on most working-age benefits, so rising prices will effectively cut the benefits of around 10.4 million households by an average of £150 per year in 2019–20. This saves the Exchequer £1.6 billion. pic.twitter.com/zRQwUBgqs9 10.13am BST The Resolution Foundation thinktank agree that households should welcome today’s inflation data (even though it shows energy bills are rising). Resolution are hopeful that real wages will accelerate in the coming months: CPI is currently 2.4%, CPIH 2.2%. Somewhat faster than expected falls in inflation today good news for households pic.twitter.com/SHqb1O28Sl Nevertheless falling inflation is a boon for wages. Real wages boosted by today’s figures and could be on to reach 1% by end of the year. pic.twitter.com/zmtYmcmZys 10.12am BST At 2.4%, Britain’s CPI inflation has fallen to a three-month low. It hasn’t been lower since March 2017. 10.05am BST 9.55am BST Thanks to the Triple Lock, Britain’s state pension will rise by £4.25 per week next year (assuming the government doesn’t ditch it). Financial expert Paul Lewis has all the details: State Pension will rise in April using the ‘triple lock’ - highest of: 2.5%; Average earnings KCA3 May-July (revised) published 16/10 was 2.6%; CPI inflation for September published 17/10 was 2.4%. So will rise 2.6% ie £4.25/week on New SP and £3.25 on basic. Extras rise by 2.4%. If correct full New State Pension will rise from £164.35 to £168.60 a week and full single basic state pension from £125.95 to £129.20 a week. Many get more or less than these amounts. Pension credit would be £166,25 single and £253.85 couple if those rules used. Other benefits which rise by CPI inflation will increase by 2.4% so for example DLA/PIP highest rate up £2.05 to £87.65 a week. Carer’s Allowance up £1.55 to £66.15 a week. All to be confirmed of course when announcement is made in a month or two. 9.52am BST Here’s what it means for pensioners, and those saving for a pension: Expected figures for 2019: 9.50am BST Some instant reaction to the fall in UK inflation: UK inflation slows more than expected in September to 2.4%. Good news, in that it helps relieve the squeeze on real incomes. Will it be enough to make the Bank of England hold off on further rate hikes? pic.twitter.com/7R0SyHMLST Our monthly inflation figure shows CPIH fell 2.2% in September 2018. Commenting on the figures, our Head of Inflation Mike Hardie said: https://t.co/ydQKmV1sQl pic.twitter.com/fDZULZVw8Y Very decent news for consumers & #BOE as #UK #consumer #price #inflation dipped to 2.4% in September from August’s 6-month high of 2.7%. Core inflation down to 1.9% (2.1%). Follows consumer purchasing power benefiting from regular earnings growth rising to 3.1% in 3 months to Aug Chocolate prices contribute to lower inflation - finally some economic news I can get on board with 9.45am BST Falling inflation is good news for households across the UK. Yesterday we learned that basic pay jumped by 3.1% per year in the three months to August, the fastest growth since the financial crisis. Inflation drops to 2.4% from 2.7%. Yesterday wage growth hit a ten year high of 3.1%. This will go some way to unwinding the decade long incomes squeeze. @ONS 9.43am BST 9.37am BST As explained earlier, this inflation rate will also dictate pension entitlement increases across the state sector. It means: 9.33am BST Breaking: Britain’s inflation rate fell to 2.4% in September, weaker than expected, and down from 2.7% in August. That means the State Pensions will rise by 2.6% under the Triple Lock next April, because average earnings in the last year (+2.6%) have grown faster than inflation. 9.29am BST In other news, IMF chief Christine Lagarde has become the latest big name to pull out of Saudi Arabia’s big investment conference. This follows the international outcry over the disappearance and apparent murder of journalist Jamal Khashoggi. “The Managing Director’s previously scheduled trip to the Middle East region is being deferred.” Related: Khashoggi: Trump defends Saudi Arabia as Pompeo heads to Turkey 9.21am BST Over in the City, the pound has dipped a little to $1.316 as traders watch for Brexit developments. Theresa May is heading to a crunch meeting with fellow EU leaders tonight, where she will try to make progress on the sticky issue of the Irish backstop. Related: Theresa May appeals to EU to keep Brexit door open UK Prime Minister Theresa May is heading to Brussels today with no breakthrough related to the Brexit talks in her bags and will instead ask the EU leaders to keep working towards a solution. What’s interesting however is that even though we’ve seen no progress, the pound is trading with a positive bias since the beginning of the week. There’s only one way to read this: everyone who’s bearish regarding a “no deal” Brexit is already short sterling and the only ones dipping their toes in the market are the short-term speculators hoping for a positive resolution. Legendary frontman of @TheWho, Roger Daltrey, says touring bands will cope after Brexit, and any problem is “nothing that can’t be solved” but Brussels is a “gravy train soaking us dry” #r4today pic.twitter.com/TEcp16yuqj 8.33am BST Investment service Hargreaves Lansdown have released a very useful note on public sector pensions. Since 2015 Public Sector Pensions have moved to using Career Average Earnings as opposed to final salary pensions. This basically means that each year members ‘bank’ their accrued pension and this is uprated in-line with the previous September’s inflation. ‘With inflation outstripping wage growth, there is a risk that public sector workers could find their overall pay distorted towards their life after work. Saving for a pension is important, but so too is having enough to put food on the table and pay the bills. Continued periods of goods going up more in price than the rise in wages could create even bigger challenges.’ 8.10am BST Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business. Millions of UK pensioners and public sector workers, and thousands of businesses around the country, will be affected by new inflation figures being released today The State Pension will rise in April using the 'triple lock’. That is the highest of: 2.5%; Average earnings KCA3 for May-July (revised) published today which was 2.6%; CPI inflation for September (published tomorrow). So at least 2.6% ie £4.25/week on New SP and £3.25 on basic. Business rates - which essentially serve as specific property taxes for resident businesses - could go up by as much as 819.23 million in England if the headline rate of inflation remains unchanged at 2.7%, according to real estate advisor Altus Group. It said 209.76 million would be paid by the ailing retail sector, which has seen a number of players go bust in recent month amid higher costs and lower consumer spending. Related: Wall Street posts biggest gains in seven months as markets roar back - as it happened Related: Netflix shares soar as it announces 6.96m new members It’s going too fast. Because, you looked at the last inflation numbers, they’re very low. #UPDATE President Donald Trump reignited his controversial criticism of the central bank, calling the Federal Reserve his “biggest threat” https://t.co/cVrMlNtRYm Continue reading…
