Bank of England chief economist says ‘not unreasonable’ to consider summer interest rate cuts, as unemployment rises– business live

Bank of England chief economist says ‘not unreasonable’ to consider summer interest rate cuts, as unemployment rises– business live

BoE’s Pill: Not unreasonable that we could consider rate cuts this summer

The Bank of England’s chief economist has said it is “not unreasonable” to think the central bank could consider cutting interest rates over the summer, Reuters reports.

This has knocked the pound, which is down almost half a cent this morning at $1.252.

Huw Pill also told an online presentation organised by accountancy body ICAEW that the UK’s labour market remains tight by historical standards, despite this morning’s rise in unemployment and the gradual slowdown in pay growth.

He said:

“There has been an easing of the labour market but it still remains pretty tight by historical standards.”

Pill also pointed to the slowdown in private sector pay growth in this morning’s data (to 5.9%, see here), saying:

“We actually got some additional data this morning that would be consistent with a small additional decline in the first quarter.”

PIll was one of seven MPC members who voted to keep interest rates on hold last week, while just two policymakers voted to cut.

Following his comments today, the momney markets now indicate there is a 53% chance of a rate cut at the BoE’s next meeting in June, up from around 50% earlier today.

Key events

Biden hikes tariffs on Chinese EV cars, chips and solar cells

Larry Elliott

NEWSFLASH: The US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.

In a move that is likely to inflame trade tensions between the world’s two biggest economies, the White House said it was imposing more stringent curbs on Chinese goods worth $18bn.

Sources said the move followed a four-year review and was a preventive measure designed to stop cheap subsidised Chinese goods flooding the US market and stifling the growth of the American green technology sector.

As well as a tariff increase from 25% to 100% on EVs, levies will rise from 7.5% to 25% on lithium batteries, from zero to 25% on critical minerals, from 25% to 50% on solar cells, and from 25% to 50% on semiconductors.

Here’s the full story:

Anglo American to slash investment in Woodsmith fertiliser mine amid break-up plan

There are fears of job cuts at the Woodsmith fertilizer mine in the North York Moors National Park, as owner Anglo American announces details of a plan to break itself up.

Fresh from rejecting a takeover approach from rival BHP Group, Anglo has revealed a series of sweeping changes this morning, which will refocus its on copper and premium iron.

The plan includes

  1. Demerging its Anglo American Platinum division – something which BHP pushed for its takeover proposal

  2. Selling or demerging its diamond operation, De Beers

  3. Selling its Steelmaking Coal operations

  4. Slowing the development of the Woodsmith project to support Anglo American’s balance sheet deleveraging.

Anglo is proposing to slash capital expenditure at Woodsmith to zero in 2026, down from $200m in 2025.

Simon Clarke, Conservative MP for Middlesbrough South and East Cleveland, fears the plan will “clearly have significant implications for the dedicated workforce” at Woodsmith.

I know a number of constituents will be very concerned by the bad news coming out of Anglo American this morning ⬇️ – so am I.

They have set out their intention to slow down the pace of their Woodsmith Mine development dramatically. (1/) pic.twitter.com/9nHIjbuVB7

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

This will clearly have significant implications for the dedicated workforce, who are my number one priority here.

I met the company last week (pictured) to discuss the potential BHP Billiton takeover bid – now rejected. (2/) pic.twitter.com/lYsME6RugG

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

There was however no hint on my call with Anglo of any intention on their part to change their own plans for Woodsmith and today’s news therefore comes as a very unwelcome surprise. (3/)

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

I appreciate any such decision is inherently market sensitive and hence can only be released to the stock market first, but this is a major blow.

I will seek a fresh meeting with Anglo as soon as possible and will update you with all further information I can share. (4/4)

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

Full story: UK real pay grows at fastest rate in two years

Larry Elliott

Larry Elliott

The level of real pay for UK workers is rising at its fastest rate in more than two years despite a cooling of the labour market that has led to rising unemployment and falling job vacancies, the latest official figures show.

Fresh data from the Office for National Statistics showed the mild recession in the second half of 2023 has had an impact on demand for workers but has been slower to affect wages.

The ONS said unemployment rose by 166,000 between the final three months of 2023 and the first three months of 2024, pushing up the jobless rate from 3.8% to 4.3%.

More here.

BoE’s Pill: Not unreasonable that we could consider rate cuts this summer

The Bank of England’s chief economist has said it is “not unreasonable” to think the central bank could consider cutting interest rates over the summer, Reuters reports.

This has knocked the pound, which is down almost half a cent this morning at $1.252.

Huw Pill also told an online presentation organised by accountancy body ICAEW that the UK’s labour market remains tight by historical standards, despite this morning’s rise in unemployment and the gradual slowdown in pay growth.

He said:

“There has been an easing of the labour market but it still remains pretty tight by historical standards.”

Pill also pointed to the slowdown in private sector pay growth in this morning’s data (to 5.9%, see here), saying:

“We actually got some additional data this morning that would be consistent with a small additional decline in the first quarter.”

PIll was one of seven MPC members who voted to keep interest rates on hold last week, while just two policymakers voted to cut.

Following his comments today, the momney markets now indicate there is a 53% chance of a rate cut at the BoE’s next meeting in June, up from around 50% earlier today.

New version of Chat-GPT tells bedtime stories, translates and flirts

OpenAI has shaken up the artificial intelligence world by releasing their latest AI chatbot,

OpenAI say that GPT-4o – the “o” stands for “omni” – is a step towards much more natural human-computer interaction.

It brings the faster, more accurate GPT-4 AI model to free users (previously you had to pay), and can accept any combination of text, audio, and images as input.

And demonstrations show just how powerful the new chatbot is.

In one demonstration, GPT-4o created a bedtime story about love and robots, telling it in a variety of different emotional and vocal inflections.

Another demonstrations showed it translating in real time between English and Spanish – an example of the way that AI could shake up the employment sector…..

… it can do English <-> Italian translations too!

GPT-4o has also been designed to sound chatty and sometimes even flirtatious, as the BBC’s technology editor, Zoe Kleinman, explains here:

Using a warm American female voice, it greeted its prompters by asking them how they were doing. When paid a compliment, it responded: “Stop it, you’re making me blush!”.

It wasn’t perfect – at one point it mistook the smiling man for a wooden surface, and it started to solve an equation that it hadn’t yet been shown. This unintentionally demonstrated that there’s still some way to go before the glitches and hallucinations which make chatbots unreliable and potentially unsafe, can be ironed out.

OpenAI throws down gauntlet to rivals with ChatGPT-4o announcement. A tough act for Google IO to follow in less than 24 hours time…. https://t.co/Y0McQc5SWe

— Zoe Kleinman (@zsk) May 13, 2024

Labour market hit by economic slowdown

The UK’s economic slowdown last year has caused Britain’s jobs recovery to falter, explains the Resolution Foundation this morning.

They point out that the post-pandemic workforce has shrunk by the equivalent of one million workers, compared to before Covid-19.

But the slowdown hasn’t yet fed through into pay packets, with real wages now growing at their fastest in rate in over two years, Resolution points out.

Nye Cominetti, principal economist at the Resolution Foundation, says:

“Britain’s jobs recovery continues to falter, with the workforce shrinking by the equivalent of one million workers since pre-pandemic times. This worrying employment fall shows the damage that an economic slowdown can cause.

“The news for those in work is more positive however, with real wages growing almost as much over the past 12 months as they did in the 16 years prior to this.

“The big question is whether the UK’s recent economic recovery will boost employment and raise output per worker, which will be needed to sustain its mini pay recovery.”

Jonathan Portes, professor of economics at King’s College London, has analysed today’s economic inactivity data:

Interesting to chart inactivity rates by country of birth; rise among UK-born partly offset by sharp fall amongst non-UK born.

Suggests very high % of new migrants are working.. pic.twitter.com/BeBikVvbv6

— Jonathan Portes (@jdportes) May 14, 2024

Kathleen Brooks, research director at XTB, also believes today’s jobs data could support a Bank of England rate cut in June.

Brooks explains:

The uptick in the unemployment rate is garnering a lot of attention this morning. It rose to 4.3%, the highest level since July last year, and above the average unemployment rate of the last 5 years, which is 4.2%.

However, this is still a very low level, and for the last three years, the unemployment rate has been in an approximate range between 3.5% – 4.5%.

This supports the BOE view that the UK’s economy is 1, resilient against higher interest rates, and 2, that disinflation is occurring while there is still virtually full employment. Thus, the rise in the unemployment rate to the top of the medium term range, is not a cause for concern, but it could support a rate cut from the BOE next month.

June interest rate cut a coin toss

The money markets are suggesting there is an evens chance that the Bank of England starts cutting interest rates in June.

There is currently a 50.2% chance of a cut next month, LSEG data shows, and a 49.8% chance that the BoE leaves interest rates on hold….

James Smith, developed markets economist at ING, says the cooling UK jobs market bolsters the chances of near-term rate cut. He agrees that “it’s looking pretty 50-50 right now” between June and August for the first rate cut.

Today’s jobs report shows there are now almost 9.4 million people who are economically inactive (neither in work, nor looking for a job).

Many of these people are keen to work, though, points out Stephen Evans, chief executive at Learning and Work Institute:

“The labour market continues to ease with employment and vacancies down. The number of people economically inactive due to long-term sickness is up 700,000 since the pandemic.

But 1.7 million people who are economically inactive say they would like a job. The answer isn’t further tightening benefit eligibility or focusing on a so-called ‘sick note culture’; it’s widening and improving help to find work.”

Charts: The latest UK employment indicators

Here are the key charts from today’s labour market report, showing the state of the UK jobs market:

Allow content provided by a third party?

This article includes content hosted on ons.gov.uk. We ask for your permission before anything is loaded, as the provider may be using cookies and other technologies. To view this content, click ‘Allow and continue’.

Share

Updated at 

Wages rose faster in the public sector than the private sector in the first quarter of the year.

Today’s jobs report shows that regular earnings (ex bonuses) in the public sector grew by 6.3% in the January-March quarter

But in the private sector, basic pay grew by 5.9% – the lowest since April-June last year.

Sanjay Raja, chief UK economist at Deutsche Bank, says:

The UK labour market continues to show signs of cooling – which should spell good news for the MPC. Private sector regular pay growth – while still elevated – came down a little more than the Bank of England was expecting at 5.9% (3m/YoY).

While we expect wage growth to remain sticky through the April period given the large 10% hike to the National Living Wage, this will give the MPC some confidence that data outturns are broadly in line with their own expectations.

Share

Updated at 

Digging into today’s pay data, we can see that earnings rose fastest in manufacturing, and finance and business services – with regular pay (ex bonuses) up 6.8% per year in both sectors in January-March.

The construction sector saw the smallest annual regular pay growth across sectors, at 2.6% (activity fell in this sector in the last quarter).

Share

Updated at 

Related Articles