The Bank of England will weigh the weakness of Britain’s wage growth against the strength of its economic recovery when it delivers fresh forecasts in its quarterly inflation report on Wednesday morning, containing signals about when a rise in interest rates is likely.
<To be delivered in tandem with the latest UK employment data, the BoE’s estimates of the amount of slack in the economy will be one of the most closely watched metrics. At the last quarterly inflation report in May, the BoE estimated the amount of spare capacity was between 1 – 1.5 per cent, judging there was room for this to narrow further before rates tightened.
By Sarah O’Connor and Claer Barrett
FT economics editor Chris Giles examines statements by Bank of England governor Mark Carney, that interest rates are likely to remain below historical norms and looks at possible changes to “forward guidance” policy.
George Osborne has just bolstered his support of Bank of England governor Mark Carney’s somewhat embattled “forward guidance” of linking interest rates to the UK’s unemployment rate – saying that he “completely rejects” the suggestion that the policy has been a failure.
In a debate with a panel of central banking heavyweights in Davos, Switzerland, Mr Osborne fairly huffily slapped backed suggestions that Mr Carney’s flagship move at the helm of the BoE has not worked.
♦ The FT’s Neil Buckley interviews Mikhail Khodorkovsky, Russia’s most famous prisoner – a former oligarch who dared to cross Vladimir Putin.
♦ Trade has broken from a 30-year trend of growing at twice the speed of the global economy, pushing economists to wonder whether there has been a fundamental shift in world business.
♦ The Palestinians have called on countries to tell companies linked to Jewish settlements in the West Bank and East Jerusalem to withdraw immediately because the settlements violate international law.
♦ Mark Carney says the Bank of England is open for business and the days when the Old Lady preached the perils of “moral hazard” without due regard to financial pressures are well and truly over.
♦ The allegation by the German government that the NSA monitored Angela Merkel’s mobile phone has set off recriminations behind the scenes in the US.
♦ The NYT looks at the friction point between the Philiippines and China in the South China Sea, reporting from a ship at the dividing line.
♦ Formula 1 is considered entertainment, not a sport, by the Indian government, while chess is considered to be a sporting event.
♦ There is some disbelief over Al-Sisi mania.
♦ Tony Blair in the the Balkans to deliver some “deliverology”. Read more
By Catherine Contiguglia
♦ An era of “digital hippies” answered the needs of crunched budgets with start-ups that focused on building communities where goods and services could be traded and shared. Their success has resulted in a regulatory backlash as traditional businesses and tax collectors look for their fair share.
♦ Obama has not been able to take control and “unwind” the “war on terror apparatus”, writes the FT’s Geoff Dyer, instead stoking jitters with increased security levels, vague warnings of Al Qaeda resurgence and lack of transparency regarding surveillance programs.
♦ Bank of England interest rates will remain at the historic low of 0.5 per cent until unemployment falls to 7 percent, new governor Mark Carney has pledged, saying that the economy has not reached escape velocity. It appears Carney is wary of removing stimulus measures too quickly, but will this forward guidance be enough?
♦ General Abdul Fattah Sissi, who led the coup to depose Mohamed Morsi, seems a popular choice to lead an increasingly divided country. Sissi is often cast as a modern Gamal Abdel Nasser, and though his western military training has not softened his views on the United States, he is seen as a leader that is dedicated to bringing liberal democracy to Egypt.
♦ The decision by US President Barack Obama to cancel talks with Russian president Vladimir Putin after NSA whistleblower Edward Snowden was granted temporary asylum is a sort of boiling point in a series of uncomfortable conversations between the two nations since Obama announced his plans to “reset” relations. Read more
♦ The Egyptian military reasserted its privileged political position by removing Mohamed Morsi from power. Troops surrounded the state broadcasting headquarters and General Abdel Fattah al-Sisi, the army chief of staff, delivered a televised speech announcing the takeover. Morsi’s authoritarian governing style exacerbated the huge challenges Egypt already faced – including a moribund economy and intense political polarisation, reports the FT’s Borzou Daragahi. David Gardner says that Morsi’s government, the liberals and Mubarak’s “deep state” are just as much to blame for Egypt’s stormy state of affairs as the generals.
♦ The Indian newspaper Patrika has achieved success through itsreputation for credibility – it doesn’t take political bribes, which is increasingly common among other Indian newspapers – and for public interest advocacy – it focuses on hyperlocal coverage.
♦ Lithuania’s president, Dalia Grybauskaite, has backed a deal to break up the Russian export monopoly that supplies gas to Lithuania by anchoring a ship off of a small nearby island to process deliveries of liquefied natural gas for homes and businesses.
♦ Le Monde reports that France has a “big brother” similar to the American Prism system that systematically gathers huge amounts of information on internet and phone activity.
♦ The FT’s Chris Giles argues that Carney’s “forward guidance” plan for the BoE may be too risky, even though it is based on a strategy used by other central banks including the US Federal Reserve and Bank of Japan. Read more