The Bank of England’s chief economist and member of the MPC, Huw Pill provided colour on his prevailing attuite of where the BoE’s monetary policy should stand. Speaking yesterday, Pill maintained that the BoE should raise rates in small incremental hikes in order to achieve a more balanced approach and avoid the narrative that the central bank either has their “foot-to-the-floor [with the accelerator] or “foot-to-the-floor with the brake” vis-à-vis monetary policy. In the last MPC meeting, Pill was one of the five who voted to raise rates 0.25% – rather than 0.5% as was the case with the four other members – and has also joined Andrew Bailey in maintaining that real wages would need to fall in order for inflation to fall back to their target rate of 2%. Currently, wage growth is nearing 5% over the last year which they say is continuing to add to inflationary pressure. Its worth remembering that Bailey (and his £575,538 pay package) came under fire from this suggestion given the increasing cost of living pressures faced by households. In the interest of context however, it is expected that by May 2024, real wages will have grown by just 2.4% since 2008 (compared with a 38% real wage increase between 1992 and 2008).
Regarding the BoE’s QE programme, Pill – who has been a supporter of limits on QE – also said that they should start winding down their £875bn worth of guilt holdings from March by ending re-investment of maturing securities. This follows the news at last week’s MPC where the BoE announced that they intended to unwind their corporate bond portfolio which currently stands at around £20bn.
The world’s second largest shipping firm, Maersk recorded its highest profit ever of £13.8bn in 2021 as it benefitted from the soaring demand in international freight as economies opened from the pandemic. Associated supply chain issues also gave the company space to drive up prices with revenues up 55% last year to $62bn. However, while the Danish shipping giant said that global supply chain issues would persist into Q2, they expected some subsequent degree of normalisation in H2 of 2022. For example, it is thought that as covid restrictions ease and cases drop, congestion at major shipping ports such as Los Angeles will improve which will thus ease tension on supply chains. As a result of this forecasted normalisation, their expected earnings are slightly lower than analysts had previously predicted and thus shares fell by 5% before recovering that ground again. That said, shares in Maersk remain some ¾ higher than a year ago.
Following the news that government is considering scrapping covid self-isolation laws, the FTSE 100 hit its highest rate in two years. Considerable gains were also seen with IAG as the news provided optimism around domestic and international flights.
Oil prices also rose yesterday as the US inventories fell to their lowest level since 2018 given the sharp increase in demand seen throughout the States as their economy rebounds. The prospect of a potential fall in supply due to further sanctions on Russia is also concerning the market. This follows news on Tuesday that the White House are in talks with oil producing and consuming countries to address soring prices which broke the $90dpb mark last week.
Data out from Zoopla also suggests that the cost of renting a property in the city centre has risen £62 from pre-pandemic levels. Of course, given that rents fell sharply during the pandemic, the recent rise has been a result of much the workforce returning to the office as well as international students and young workers returning to the city centre. Indeed, the data revealed that the demand for rental properties was up 76% last month compared to an average January in each of the previous four years.
At 13:00 this afternoon, all eyes will be on US CPI data which is expected to surpass the current level of 7% that currently stands at a 39 year high. Additionally tomorrow at 07:00 UK GDP figures will be released for Q4 of 2021 where the market is expecting a quarter-on-quarter growth at around 1.1% (in line with Q3) while year-on-year growth is expected at 6.4%.