Odds of UK interest rate rise surge after inflation jumps to 10.4% – business live

Andy King, a member of the OBR’s Budget Responsibility committee, warns the Treasury committee that in a “very volatile environment”, the OBR will make larger forecast revisions from one budget to the next.

There is a habit that bad news is absorbed into higher debt levels, while chancellor will tend to spend the good news – and that means debt will ratchet up, he points out.

In economist speak, that doesn’t sound very responsible, King adds.

The Treasury Committee begin today’s hearing by asking if last week’s budget was a responsible one.

Richard Hughes, chair of the Office for Budget Responsibility, says it was responsible, in the sense that the chancellor was still on track to meet the target of having debt falling as a share of GDP in five year’s time.

But, Hughes cautions, Jeremy Hunt only has a 52% chance of meeting his fiscal rules – which is the lowest since the OBR was set up [the OBR said last week that the chancellor only has £6.5bn of headroom].

UK budget watchdog speaks to the Treasury Committee – watch live

There’s a nervy calm on Wall Street today, as trader await the Federal Reserve’s interest rate decision in four hour’s time.

The main indices are all slightly lower in early trading:

• Dow Jones industrial average: down 11 points at 32,548, down 0.036%

• S&P 500 index: down 1.7 points at 4,001, down 0.043%

• Nasdaq Composite: down 9 points at 11,851, down 0.074%.

Daniel Takieddine, CEO for MENA at BDSwiss, says:

The Federal Reserve is expected to reveal its decision relating to interest rates later today. The uncertainty over the outcome continues to be an important issue for investors. A higher probability of seeing a 25 basis point hike is priced in market prices but a pause is also plausible due to the banking sector’s woes.

At the same time, the higher-than-expected inflation figures in the UK broke the current downtrend and could push the Bank of England into a tighter monetary policy direction. The decision could impact the stock market and the pound where investors have been uneasy with the slew of events of the last few days.

The UK labour market is likely to keep suffering from a shortage of workers, ratings agency Fitch predicts today – which could help push up wages.

In a new report, Fitch say that there has been a decline in the UK labour force since the start of the pandemic, largely due to an exodus of older workers who on the whole have little incentive to return to work.

Immigration may help to plug some of the gap, but labour shortages are likely to remain, they predict.

The report says:

The UK’s labour force is still smaller than it was before the pandemic, in contrast to most other major advanced economies. Fitch estimates that had the UK’s labour force continued to grow at its 2015-2019 trend rate, it would be around 2.5% bigger than it is today, equivalent to almost 900,000 workers.

Downing Street has said Rishi Sunak remains confident he will fulfil his pledge of halving inflation this year.

Asked about the rise in official figures, the Prime Minister’s spokesman said:

“This illustrates reducing inflation is not something that is automatic, it’s not something we’re on a glidepath to do, it requires discipline and making difficult decisions – that’s why we want to stick with our plan to get inflation under control.”

The Bank of England has predicted that inflation will sharply by the end of this year, partly due to ‘base effects’ (when the data catches up with price rises a year previously).

There are still jitters in the US banking sector today.

Shares in First Republic, the troubled regional lender, are down 2.6% in premarket trading, a day after ralling 29% on hopes of a rescue deal brokered by JP Morgan’s Jamie Dimon.

First Republic has been struggling to remain viable following a flight of deposits.

Reuters reported last night that First Republic is looking at ways it can downsize if its attempts to raise new capital fail, while the Financial Times says the bank has hired investment bank Lazard to help it explore strategic options.

UK interest rates are seen hitting 4.5% by August, up from 4% today.

A quarter-point increase in UK interest rates, to 4.25% tomorrow, is now a 97% likelihood according to the money markets.

That’s quite a swich, from a roughly 50:50 chance at the start of the week.

Here’s a breakdown of how everyday items have shot up in price over the past year:

Centrica CEO receives £4.5m pay packet

The cash savings deals currently on the market cannot beat inflation at 10.4%, according to analysis by Moneyfactscompare.co.uk.

Two years ago, in March 2021, more than 300 savings deals, including regular savings accounts and Isas, could beat the rate of inflation at that time, which was significantly lower than it is now, it says.

Looking at the “best buys” currently available, the website highlighted an easy access savings account paying 3.35% from Chip, a notice account paying 3.50% from the Melton Building Society and a one-year fixed-rate bond paying an expected profit rate of 4.43% from Al Rayan Bank.

And looking at Isas, the website highlighted a 3.20% easy access deal from Cynergy Bank and a one-year fixed-rate Isa from Santander at 4.15%.

E-commerce giant Amazon is lifting its basic pay for UK workers from the start of Aptil.

Minimum starting pay for Amazon’s UK workers will be £11 an hour after the rise in April, up from £10.50. It employs more than 50,000 people across the country.

Many companies, including Pret a Manger and Costa Coffee, have announced pay rises in recent weeks as they otherwise risked falling foul of minimum wage rules, which rises to £10.42 per hour from the start of next month.

However the £10.50 that Amazon workers are currently paid would not have broken the new rules.

Amazon’s minimum starting pay is also based on location – some workers will get up to £12 per hour.

A spokesman said:

“We regularly review our pay to ensure we offer competitive wages, and we’re pleased to be announcing another increase for our UK teams.

“Over the past seven months our minimum pay has risen by 10%, and by more than 37% since 2018.

“We also work hard to provide great benefits, a positive work environment and excellent career opportunities.

“These are just some of the reasons people want to come and work at Amazon, whether it’s their first job, a seasonal role or an opportunity for them to advance their career.”

But in January, it announced plans to shut three of its 30-plus UK warehouses and seven small delivery sites, affecting more than 1,300 jobs.

UK manufacturers were hit by shrinking order books and falling output over the last quarter, a new healthcheck of the sector shows.

The CBI’s industrial trends report, just released, shows that order books were the weakest since February 2021, while production output fell.

The CBI’s gauge of expected selling prices fell to +25 in March, the lowest since March 2021 and down from +40 in February but still strong in historical terms.

Anna Leach, deputy chief economist at the CBI, explains:

“Falling output and softer order books highlight the challenging demand environment for UK manufacturing.

“Together with some easing of input costs, this seems to be feeding through to a marked weakening in selling price expectations for the next quarter.