UK cost of living looms as Bank of England meets – business live | Business
Hello and welcome to our continued coverage of the global economy, financial markets, euro area and business.
Britain’s cost of living crisis will give the Bank of England food for thought today as the central bank meets to set interest rates.
Yesterday, two energy companies went bankrupt, affecting another 800,000 households, as ministers admitted they were considering a one-off tax on companies taking advantage of record gas prices.
Avro Energy, with 580,000 residential customers, has become the largest energy supplier to go bankrupt and Green, which has 255,000 customers, has also ceased its activity, that is to say more households will be facing higher energy bills within a few weeks.
Around 1.5 million homes are now at risk of being moved to new suppliers – likely at a higher rate, which means they could have to pay hundreds of pounds more for their gas and electricity per year.
As we report this morning:
Pressure is mounting on ministers to find ways to provide financial support to households, which are set to experience a £ 139 increase in bills next month – some of the most expensive energy bills on record.
Combined with the £ 20 universal credit cut and rising inflation, Labor and some Tory MPs have warned of a potentially catastrophic cost-of-living crisis.
On Wednesday, the Joseph Rowntree Foundation estimated that a typical low-income family would be £ 1,750 worse off by next April.
The shock in the energy market has also raised concerns for struggling UK consumer supply chains and heavy industries such as steel, rekindling fears of empty supermarket shelves before Christmas and a return to a three-day week for factories.
the Managing Director of Green, Peter McGirr, told the Guardian that there would be “one more tsunami [collapses] to come ”, because small suppliers do not have their pockets deep enough to cope with soaring costs without passing them on to their customers.
“We are an independent company.
“It is difficult to access funding and nothing has been done to help. “
He added that crisis talks held last weekend by Business Secretary Kwasi Kwarteng had not included the small suppliers most vulnerable to the energy market shock and said calls for His company’s help with the industry regulator had “fallen on deaf ears. ”.
So this is all giving the Bank of England a headache as policymakers question whether to continue its quantitative easing stimulus package and when it might need to raise interest rates. to calm inflation.
Inflation exceeded the Bank’s target last month, to 3.2%, and is expected to continue to rise.
While soaring energy prices will push inflation up, squeezing household budgets means that higher borrowing costs would be painful.
Rising prices in stores, the impending £ 20 / week cut in universal credit and the end of the holiday program next week mean many families are facing a cost-of-living crisis this winter.
New estimates from the Joseph Rowntree Foundation, seen by the Guardian this week, revealed that a typical low-income UK family would be worse off by £ 1,750 by April 2022 as factors combine to create a crisis spiraling cost of living.
So the BoE is expected to leave borrowing costs at record highs as of noon today – while meeting minutes will show whether its monetary policy committee is concerned about the economic situation.
German Bank analysts don’t expect any changes today, but they also expect the BoE to reaffirm that some tightening will be needed over the next few years to control inflation.
Yesterday, the BoE’s counterparts in the United States said they may soon begin to “scale back” their stimulus program and end the bond-buying program by next summer.
The Federal Reserve left interest rates unchanged at near zero after its last meeting. Rates were cut in March 2020 as the U.S. economy reeled from the pandemic. But the Fed has also indicated that it may soon start withdrawing the $ 120 billion monthly asset purchase program it launched when the coronavirus hit the United States.
“If progress continues broadly as planned, the Committee believes that moderation in the pace of asset purchases may soon be warranted,” the Fed said after the meeting.
Also coming today …
New surveys of UK, eurozone and US businesses will show how squeezing energy prices, raw material shortages and record vacancies are hitting businesses.
Investors are also watching the Evergrande crisis, as the Chinese real estate developer faces a large interest payment on the debt owed today. Yesterday he struck a deal on another debt, on a domestic bond, which gave the markets some reassurance – with stock markets set to rise.
- 9 am BST: “flash” survey of purchasing managers in the euro zone for September
- 9:30 am BST: “flash” survey of British purchasing managers for September
- 12 p.m .: Bank of England interest rate decision and MPC report
- 1:30 p.m. BST: US weekly jobless claims figures
- 2:45 p.m. BST: “flash” survey of American purchasing managers for September