Federal Reserve raises rates despite banking crisis
The Federal Reserve has raised US interest rates for the ninth time in a row despite turmoil in the country's banking system.
The central bank pressed ahead with a 0.25 percentage point rise in a bid to quash stubbornly-high inflation, despite ongoing problems for regional banks.
The decision took the upper limit of US interest rates to 5pc, the highest level since 2007.
Jerome Powell, the Fed’s chairman, said policy makers had taken into account recent turbulence in the American banking system, including the failure of Silicon Valley Bank.
However, he stressed that policymakers had to prioritise tackling inflation.
He said: “We have to bring inflation down. There are real costs of bringing it down to 2pc but the costs of failing are much higher.”
US stocks were volatile in the wake of the announcement, with the Dow initially jumping before falling back to a loss of 0.5pc.
Mr Powell’s comments will pile more pressure on the Bank of England to raise rates again on Thursday, following a shock rise in inflation.
Official figures published on Wednesday showed prices rose by 10.4pc across the economy in February, breaking three straight months of declines. Inflation had been expected to fall below double digits for the first time since August.
City traders yesterday ramped up bets on the Bank of England raising interest rates by 0.25 percentage points, which would take the base rate to 4.25pc.
More than 1.4 million homeowners would face yet another increase in their mortgage bills as a result.
639,000 mortgage borrowers on tracker rates would see their payments go up by £285 a year on average if the base rate hits 4.25pc, according to the banking trade body UK Finance.
Another 773,000 on “standard variable” rates will be hit with increases of £182 a year.
A 0.25 percentage point increase would mark a slowing of the pace in rate rises from the Bank of England.
Caution is expected as the global financial system continues to feel shockwaves from the collapse of Silicon Valley Bank. Credit Suisse was forced into a cut-price takeover rival UBS at the start of this year to avoid collapse.
On Thursday, shares in Californian bank PacWest dropped 17pc after it said clients had pulled 20pc of deposits since the start of the year.
Mr Powell sought to reassure, telling journalists last night: “The banking system is strong, it is sound, it is resilient.”
He said Silicon Valley Bank was an “outlier” run by executives who he claimed had “failed badly”.
However, he said it was “clear” that rules needed to be tightened for mid-sized banks.
Mr Powell said the recent bank collapses would lead to “tighter credit conditions” for households and businesses, which would weigh on economic activity, hiring and inflation. It was too early to tell what impact this would have on monetary policy, he said.
The US central bank softened its guidance on future rate rises, with Mr Powell saying there would be “some additional hikes, maybe” depending on the data.
However, he ruled out any interest rate cuts this year. He said: “We are committed to restoring price stability.”
The deal to save Credit Suisse was a “positive outcome” that “seems to have gone well so far," he added.
The comments came hours after data in the UK showed food prices were growing at their fastest pace since 1977.
Vegetable shortages contributed to inflation of 18.2pc for food and drink in the year to February.
Diners also faced the highest annual price rises in restaurants and cafes since 1991.
Jeremy Hunt, the Chancellor, said the inflation data demonstrated the need to continue fighting price rises.
He said: “Falling inflation isn't inevitable, so we need to stick to our plan to halve it this year.”
Last week the European Central Bank also continued tightening with a 0.5pc rise.
Christine Lagarde, the ECB’s president, warned that inflation was “still high” and that a robust response was needed from the central bank to bring it back to 2pc.
That's all from me. But before I go, have you seen the price of Bitcoin?
Bitcoin is displaying some genuine diversification attributes today - to the downside. A dovish Fed sent 2-year Treasury yield down in anticipation of looser monetary policy. That should see Bitcoin rally, but instead it fell. Heads you lose. Tails you lose. If you hold Bitcoin. pic.twitter.com/ChirQslM0F
— Robin Brooks (@RobinBrooksIIF) March 22, 2023
US government bond yields decline
Treasury yields have retreated in the wake of the Federal Reserve's decision.
Policy sensitive two-year yields have fallen 21 basis points to 3.9pc, while the benchmark 10-year yield has fallen 16 basis points to 3.45pc.
Meanwhile, losses are quickly mounting on Wall Street's main equity indexes.
The Dow Jones Industrial Average has now down 1.63pc, shedding 530.49 points. The S&P 500 has fallen 1.65pc.
A decline in banking stocks also follows comments made by Treasury Secretary Janet Yellen signalling that shareholders and debtholders of failed banks are not protected by the US government.
If the banks are sounds and resilient, and the situation is stabilizing, please tell bank stock investors.
After Yellen's headline that they are not considering expanding the FDIC insurance cap, banks stocks tanked and are just a few bps from the low of the entire crisis. pic.twitter.com/tWfLl5e0ay
— Jim Bianco biancoresearch.eth (@biancoresearch) March 22, 2023
Jerome Powell 'shaken' by banking crisis, says KPMG chief economist
Jerome Powell’s tenor was significantly more tentative and less confident than he was at the last Federal Open Market Committee meeting in February, says a KPMG economist.
Diane Swonk, chief economist at KPMG US, said:
The crisis has clearly shaken him. He was careful to leave all policy options on the table. He was hesitant to formally guarantee all depositors are insured – there is no way for the Fed to currently do that - but said that depositors “should assume their deposits are safe.”
Powell did acknowledge that recessions are “nonlinear,” a word that is important to remember. Once unemployment starts rising, it is hard to tell how high it will rise. Powell said that financial conditions have tightened more than traditional measures would suggest.
However, Powell attempted to shut the door on rate cuts this year by arguing that they are not in the base case scenario. The Fed is still fighting inflation, for now. “That is all I have to say,” Powell closed.
Gap between market narrative and Fed thinking too wide
Further increasing interest rates despite a slowing economy with banking risks could be the Federal Reserve's Trichet moment, one asset manager warns.
Jean-Claude Trichet, the former president of the European Central Bank, oversaw premature interest rate increases which eventually led to the 2011 sovereign debt crisis.
Craig Shapiro, a macro advisor at LaDuc Trading, said:
The market narrative will very quickly shift to this being the Fed's "Trichet" moment. Tightening further into a clearly slowing eco with rising banking risks because inflation remains too elevated. The gap between market expectations for cuts and Fed thinking hikes is too wide
— Craig Shapiro (@ces921) March 22, 2023
Wall Street shares fall sharply
Wall Street stocks have sharply tumbled in response to Federal Reserve's announcement.
The Dow Jones Industrial Average is down 0.61pc at 32,362.75, while the S&P 500 has declined 0.53pc 3,982.03.
Meanwhile, the tech-rich Nasdaq Composite index has fallen 0.31pc to 11,822.77.
US regulator not considering unlimited insurance for bank deposits
The Federal Deposit Insurance Corporation is also not considering providing "blanket insurance" for banking deposits, Treasury Secretary Janet Yellen told a Senate subcommittee.
Shareholders and debtholders are not protected by the US government, says Treasury Secretary
Treasury Secretary Janet Yellen has stressed that failed banks are not being bailed out by the US government.
“It’s important to be clear: Shareholders and debtholders of the failed banks are not being protected by the government,” Yellen said at a hearing before a Senate subcommittee.
“No losses from the resolution of these banks are being borne by the taxpayer,” she added. “Deposit protection is provided by the Deposit Insurance Fund, which is funded by fees on insured banks.”
It comes after the Federal Reserve stressed that the US banking system is "sound and resilient" after increasing interest rates to 5pc.
Fed chair Jerome Powell noted that anticipated tighter credit conditions as a result of bank failures will in principle have the "equivalent" if not greater impact of increasing interest rates.
Fed Reserve doesn't expect to rate cuts this year
Federal Reserve officials do not expect interest rate cuts this year, chair Jerome Powell told reporters.
"Participants [of the Federal Open Market Committee] expect relatively slow growth, gradual rebalancing of supply and demand in the labour market, with inflation moving down graduaally," Mr Powell said.
"In that most likely case, if that happens, participants don't see rate cuts this year, they just don't."
However, the markets have now priced in one more increase in May and then rate cuts for the rest of the year.
While the Fed is saying it has no plans to cut interest rates any time soon, the market clearly disagrees. Substantial rate cuts are being priced in by year-end. Given lagged impact of hikes to date and problems in banking sector tightening financial conditions seems reasonable. pic.twitter.com/sdLUzovg5u
— Kathy Jones (@KathyJones) March 22, 2023
#Fed' s Powell: Fed officials 'just don't' see rate cuts this year. Markets strongly disagree! pic.twitter.com/14OnPWwRTo
— Holger Zschaepitz (@Schuldensuehner) March 22, 2023
Interest rate hike could result in 'financial accidents'
While the Fed Reserve has signalled a near-pause in tackling inflation with aggressive monetary policy, increasing interest rates could still lead to "financial accidents".
George Lagarias, chief economist at Mazars Wealth Management said:
The Fed continues to walk a tightrope, balancing the need to stabilise the financial system and the need to regain credibility as an inflation fighter. Despite the initial positive reaction by markets, the fact is that the interest rate is at 5pc, an area where financial accidents tend to happen. Conditions could well remain tight until the end of the year, despite investors’ expectations for a quick rate de-escalation.
This could mean more volatility, and possibly risk more “things breaking”. We feel that the Fed’s focus on inflation-fighting may be further challenged in the months ahead, as tight monetary conditions continue to reveal the chinks in the armour of the global economy.
Fed's decision was the 'only sensible move'
The Federal Reserve sends the message that its members are taking the risk of further banking challenges seriously, according to one analyst.
Chris Beauchamp, chief market analyst at IG Group, the trading platform, said:
After the gyrations in forecasts in recent weeks, the Fed has duly delivered the dovish hike many had expected. It was the only sensible move really, given the turmoil in global markets since the failure of SVB. The dot-plot points towards a steady cut in rates in 2024, and it sends the message that Fed members take the risk of further stress in banks seriously.
US markets have surged following the statement, reacting enthusiastically, while the dollar is down, but all sides will need to be careful in case a potentially-cautious Powell is misinterpreted as a reason to turn pessimistic once again.
Pound reaches seven-week high
The pound has surged 0.67pc against the dollar to $1.23 following the Federal Reserve's announcement.
Fed Reserve shifts to dovish stance
Senior economics reporter Eir Nolsøe has the analysis on the Federal Reserve's latest decision:
The Federal Reserve sought to allay fears of further turmoil in the US banking system when raising interest rates by 0.25 points to a target range of 4.75pc to 5pc.
"The U.S. banking system is sound and resilient," the central bank said in a statement.
It warned however that banks were likely to tighten lending criteria in response to the tumult, which would suppress growth but also help bring down inflation.
"Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain," it said.
The Fed also signalled that further rate rises after the most aggressive round of interest rate rises since the 1980s are far from certain.
Whereas its last statement in February said that "ongoing increases" would be appropriate, it has now shifted its language to say that additional hikes "may" be appropriate.
Further monetary tightening 'may be appropriate', Fed warns
The Federal Reserve has said further monetary tightening may be necessary to achieve its long-term target of 2pc inflation and achieve maximum employment.
The central bank said:
The [Federal Open Market Committee] will closely monitor incoming information and assess the implications for monetary policy. The Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.
In determining the extent of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.
Federal Reserve: banking turmoil will result in 'tighter credit conditions'
How much recent banking turmoil will impact on economic activity, hiring and inflation is uncertain, according to the Federal Reserve.
Commenting on its decision to increase interest rates, the US central bank said in a statement:
Recent indicators point to modest growth in spending and production. Job gains have picked up in recent months and are running at a robust pace; the unemployment rate has remained low. Inflation remains elevated.
The U.S. banking system is sound and resilient. Recent developments are likely to result in tighter credit conditions for households and businesses and to weigh on economic activity, hiring, and inflation. The extent of these effects is uncertain. The Committee remains highly attentive to inflation risks.
Rail strikes halted while RMT considers new pay offer
The National Union of Rail, Maritime and Transport Workers is considering a new offer from the Rail Delivery Group which could resolve the pay dispute.
The RMT said in a statement:
Following further talks between RMT and the Rail Delivery Group today, a proposal was tabled by the RDG which could lead to a resolution to resolve the current national rail dispute through a new offer.
The NEC has therefore suspended strike action scheduled for March 30 and April 1.
RMT will have further talks with the RDG with a view to securing a new offer on pay, job security and working conditions.
The dispute remains on and the union will continue to make preparations for a reballot when the current mandate runs out in mid-May.
Rail Delivery Group spokesperson said:
We welcome this positive step by the leadership of the RMT to call off their planned action on March 30 and April 1. This is great news for our customers and for our staff.
We are now jointly focused on working constructively towards a settlement to this dispute, which will mean we can do what we have always wanted to do - give our people a pay rise and help secure the long-term future of the railway with rewarding careers for all those who work on it.
Federal Reserve raises interest rates to 5pc
The Federal Reserve has increased interest rates as it battles to get inflation under control, despite the US economy reeling from banking turmoil.
The US central bank has raised the upper limit of the federal funds rate from 4.75pc to 5pc.
Pre-Fed announcement markets round-up
Let's have a quick look at the markets before the Federal Reverse's imminent interest rate decision.
The Dow Jones Industrial Average has fallen 0.23pc to 32,485.38, while the S&P 500 has dipped 0.09pc 3,999.33.
Meanwhile, the tech-rich Nasdaq Composite index has nudged up 0.08pc to 11,869.99.
On the other side of the Atlantic, the internationally focused FTSE 100 index climbed 0.41pc to close at 7,566.84. The midcap FTSE 250 index tumbled 0.11pc to 18,757.79.
Strong demand for UK banking stocks continued into another day, with shares increasing 0.87pc across the FTSE 350.
Rail strikes suspended
National rail strikes scheduled for March 30 and April 1 have been supsended following further discussions, RMT has announced.
🚨 | STRIKE ACTION SUSPENDED
Following further discussions between @RMTunion and the Rail Delivery Group earlier today, industrial action scheduled for 30th March and 1st April is suspended.#RailStrike pic.twitter.com/BwYKw2uMRZ
— RMT (@RMTunion) March 22, 2023
Google’s Bard chatbot repeats mistake that wiped $120bn off share price
Google’s artificial intelligence chatbot is still making the same error that contributed to a $120bn wipeout for the tech giant’s share price a month ago.
Bard, which was opened to the public in the US and UK on Tuesday, still incorrectly claims that the James Webb Space Telescope took “the very first pictures of a planet outside of our own solar system”.
Senior technology reporter Matthew Field reports:
Google has admitted that the chatbot, which was released for a public trial on Tuesday, will make errors when it is asked factual questions by users.
In a blog post announcing the open testing, Google admitted its algorithms "can provide inaccurate, misleading or false information while presenting it confidently".
A Google spokesman pointed The Telegraph to a paper published by a Google research executive on the limits of the technology behind Bard.
The paper said the models used by Bard can "generate plausible-sounding responses that include factual errors – not ideal when factuality matters but potentially useful for generating creative or unexpected outputs".
Google has labelled Bard an "experiment", rather than a product ready for general use.
Less than an hour to go
The Federal Reserve will announce its interest rate decision in less than 45 minutes. Analysts are placing their bets on an increase of 25 basis points:
Just over an hour out from the #FOMC decision. Three quarters of those that participated in my poll think it will be a hike. Fed Fund futures are pricing in an 86% probability of a 25bp hike. Economists consensus favors a hike as well. pic.twitter.com/N9t8B5CTIV
— John Kicklighter (@JohnKicklighter) March 22, 2023
Drax ends pay dispute with hydro station workers
Workers at Drax’s hydropower plants have called off strikes after accepting an improved pay deal.
Around 50 union members across three power stations in Scotland have accepted an 8pc pay rise, Unite announced on Wednesday.
The workers will also receive a £1,500 one-off cash payment, plus an additional day of annual leave backdated to last October.
Nearly 85pc of the union members - which includes engineers, plant controllers, electrical craft and mechanical workers - had previously supported strike action.
Elaine Dougall, Unite regional co-ordinating officer said:
The deal at Drax Hydro achieves a number of significant enhancements to pay, terms and working conditions. The deal has also been reached prior to any industrial action taking place, which was always the ambition during the negotiations.
However, it’s equally clear that this deal wouldn’t have been achieved without our members demonstrating to Drax Hydro that they were determined to fight for a better deal through supporting and taking strike action if necessary.
Nvidia expects AI to represent "quite large" portion of revenue in year ahead
US chipmaker Nvidia expects its generative artificial intelligence business to substantially grow over the next year.
Chief executive Jensen Huang said that the technology will grow from a "single digit" to a "quite large" portion of the company's revenue in the coming year, Reuters reported.
Nvidia revealed better-than-expected profit forecasts last month, predicting sales of $6.5bn for this quarter, ending in April.
The bullish forecasts come as the company's push into artificial intelligence helps offset sluggish demand for personal computer chips.
Nvidia, which gained major success building graphic processors used to power video games, has since repositioned itself in the growing artificial intelligence hardware market under the leadership of chief executive and co-founder Jensen Huang.
Interest rate increase won't stop banking sector woes
Increasing interest rates could breed short-term confidence, but this will "boomerang" if further turmoil banking emerges.
Skanda Amarnath, the executive director at research group Employ America, explains:
If it's not grounded in a clear assessment of actual banking turmoil risks, "The Fed should hike simply because holding will cause more fear and panic" is a risky proposition.
Hike might breed short-run confidence, but if further turmoil emerges, confidence will boomerang
— Skanda Amarnath (@IrvingSwisher) March 22, 2023
Amazon faces further industrial action despite pay bump
Amazon faces further industrial action across its UK warehouses despite plans to boost starting salaries.
“We’re listening to Amazon workers and the message is very clear: this new pay rate is an insult,” GMB union representative Amanda Gearing said.
She added: “In response we will be consulting over the next few days and announcing a new wave of action.”
Next month, Amazon will increase starting salaries for British workers from £10.50 to £11 per hour.
It becomes the latest retailer to boost pay in response to new minimum wage rules, which requires workers aged 23 and over to receive at least £10.42 per hour.
US lawmakers call for new Fed Reserve watchdog following SVB collapse
US lawmakers are calling for a new watchdog to tighten bank supervision following the collapse of Silicon Valley Bank and Signature Bank.
Republican Rick Scott and Democrat Elizabeth Warren are introducing a bipartisan legislation to replace the Federal Reserve's internal regulator with one appointed by the President.
The US central bank current operates with an internal inspector general who reports to the Federal Reserve's governor board.
Elizabeth Warren said: “The recent bank collapses and regulatory failures by the Fed have underscored the urgent need for a truly independent inspector general to hold Fed officials accountable for any lapses or wrongdoing."
Vast majority of surveyed analysts expect Fed Reserve to raise interest rates to 5pc
Nearly 90pc of surveyed analysts believe the Federal Reserve will increase interest rates by 25 basis points today, while only a half think this is what the central bank should do.
A Deutsche Bank survey shows that many analysts expect the Fed to make a mistake today. While only about half of respondents think the Fed should raise rates by 25bps today, a much greater percentage - 86% - think that's what the Fed is going to do. pic.twitter.com/z3CpjpaLMn
— Lisa Abramowicz (@lisaabramowicz1) March 22, 2023
All eyes will be on the US Federal Reserve this evening as it announces its next interest rate decision.
I'm signing off but my colleague Adam Mawardi will keep you informed on everything that happens and the reaction.
Boss of British Gas owner paid £4.5m despite prepayment meter scandal
The boss of British Gas owner Centrica has been paid £4.5m despite a scandal at the company over the forcible installation of energy prepayment meters in people’s homes.
Special correspondent Matt Oliver has the latest:
Chris O'Shea's pay for 2022 includes £3.7m in bonuses, a £790,000 salary and £16,000 in benefits, according to the company’s annual report.
It is up from £875,000 a year ago, when the chief executive chose to defer awards worth £1.6bn, including a bonus, as millions of customers struggled with surging energy bills.
It comes after Centrica was found to have sent debt collectors into the homes of vulnerable customers to force-fit prepayment meters.
Read how the company's pay committee justified his pay.
Major Tory rebellion fails to materialise as Sunak's Brexit deal sails through
Big news for post-Brexit trading arrangements in Northern Ireland.
Rishi Sunak's new Brexit deal sailed through the House of Commons this afternoon as a major Tory rebellion failed to materialise.
MPs voted overwhelmingly in favour of the Windsor Framework as it was backed by 515 to 29, a majority of 486.
Our politics live blog has the latest.
London stock markets now £200bn smaller than Paris
Paris is leaving London in its wake in the competition to be Europe's largest stock market, with analysis showing that companies traded there are worth $250bn (£204bn) more than in the UK.
The French capital became the continent's largest equity trading hub for the first time in November last year.
Its total market capitalisation now stands at $3.13trn, a quarter of a trillion dollars larger than London.
The French stock market has strongly outperformed the UK this year, with its benchmark CAC 40 index surging 10pc in local currency terms, versus just 1pc for the FTSE 100.
Record surge for Virgin Orbit shares
Virgin Orbit said it is targeting an "incremental resumption of operations" sending its share price on a record surge.
It was reported earlier that Richard Branson's cash-strapped satellite business is near a deal for a $200m (£162.7m) investment from Texas-based venture capital investor Matthew Brown via a private share placement.
In a statement, the company said it was continuing discussions with potential investors and exploring opportunities after furloughing staff last week.
Its share price rocketed by as much as 74pc - its biggest ever intraday gain - having fallen 76pc this year after its failed launch in Cornwall in January. The company said:
Our first step will begin Thursday of this week, when we plan to return a subset of our team to focus on critical areas for our next mission.
We are looking forward to getting back to our mission and returning to orbit.
Greggs to open cafés in four more Primark stores
Primark will open Greggs cafés in four of its stores in the coming months, following two successful pilots.
The concessions - known as Tasty by Greggs - will open in its Newcastle, Bristol, Liverpool and Leeds stores between now and the end of July.
It has already opened the cafés in its London Oxford Street East and Birmingham High Street stores.
Primark is also extending its partnership with WornWell by the Vintage Wholesale Company, with new stores
planned for Bristol and Cardiff this month.
Tim Kelly, director of new business development at Primark, said:
Our stores are at the heart of Primark and we're always looking for ways to bring them to life, giving customers experiences they can’t find anywhere else.
Our partnerships with Greggs and WornWell have been two very different partnerships but the customer
reaction to both has been fantastic, so we're delighted to be expanding our partnerships, bringing them to more locations across the UK and offering customers even more reasons to visit their local store.
PM confident on halving inflation this year, says No 10
Downing Street 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.
US regional bank’s shares drop as Federal Reserve ponders key rate decision
The Federal Reserve will make its interest rate decision as another regional bank suffers a slump in its share price.
PacWest Bancorp's shares sank by 11pc at the opening bell after it revealed it had been forced to seek $1.4bn in cash from an investment firm.
The Los Angeles-based lender - which trades as Pacific Western Bank - sought out the cash injection from Atlas SP Partners after clients withdrew another 20pc of the bank’s deposits.
It insisted deposit levels have “stabilised,” with about $4.9bn of the total outflows of $6.9bn coming from its venture banking segment.
The bank also revealed that it borrowed $3.7bn from the Federal Home Loan Bank System, $10.5bn from the Federal Reserve’s discount window and $2.1bn from the Bank Term Funding Program as of March 20.
US markets quiet after opening bell
There was little movement on the main indexes on Wall Street as markets opened, ahead of the US Federal Reserve's interest rate decision this evening.
The Dow Jones Industrial Average was flat at the opening bell at 32,553.97 while the S&P 500 slipped 0.1pc to 3,998.56.
The Nasdaq Composite also fell 0.1pc to 11,844.16.
Nick Leeson, rogue trader who brought down Barings Bank, makes comeback as private spy
Nick Leeson, the ex-derivatives trader who brought down Barings Bank, has joined a corporate intelligence firm run by Harvey Weinstein’s former private investigator.
Mr Leeson, who described himself as the "original rogue trader", has joined London-based Red Mist to help investors seek compensation in court when regulators are unable to help.
The company has been set up by Seth Freedman, a former operative of controversial private spying agency Black Cube.
Mr Freedman's career has included time as an undercover investigator for the disgraced movie producer Harvey Weinstein.
In 2018 he left Black Cube, which is run by veterans of Israeli intelligence, and set up Red Mist in 2021.
Mr Leeson, 56, brought down Barings Bank in Singapore in 1995 after amassing losses of about $1.4bn, which led to the bank’s failure and eventual sale to ING for £1.
Read how he thinks his past experiences will help him in his new role.
Bank of England and Fed will both raise rates by 25 basis points, says BlackRock chief
The Bank of England and US Federal Reserve will both raise interest rates by a quarter of a percentage point this week according to a top figure at the world's largest asset manager.
Alex Brazier, deputy head of BlackRock's Investment Institute, said the Fed is following the playbook of the European Central Bank amid the banking turmoil.
He told Bloomberg TV that the Fed is trying to "separate what they're trying to do with monetary policy, which is fight inflation, and what they're trying to do with financial stability policy, which is stabilize this banking turmoil".
He said the Fed will be "very keen not to suggest that their commitment to get inflation down has somehow waned".
Mr Brazier, who is also a former member of the Financial Policy Committee at the Bank of England, said that "on balance" he sees the Monetary Policy Committee raising rates by 25 basis points tomorrow.
However, he added that it is difficult to gauge given the "hot" inflation numbers today.
Government borrowing costs rise as Bank expected to raise rates
Government borrowing costs have been rising amid expectations that the Bank of England will raise interest rates tomorrow.
Prices of two-year gilts have slumped, sending yields rising by 23 basis points to 3.478pc.
Ten-year bonds have seen their yield rise by 16 basis points to 3.525pc.
Traders are presently pricing in an 89pc chance that the Bank of England will raise interest rates by 0.25 percentage points tomorrow.
Bond prices tend to fall when interest rates go up, sending the yields on the debt - the Government's cost of borrowing - higher.
GameStop profits boost meme stocks
Meme stocks are rising before the opening bell in the US after GameStop, one of the most heavily traded off-brand stocks during the pandemic, posted a surprise profit for the fourth quarter.
Rather than a per-share loss of 16 cents as Wall Street had expected, the video game retailer reported a profit of 16 cents per share, or $48.2m in all.
GameStop's revenue fell and much of the profit gain came from aggressive cost cutting, including store closures and layoffs.
However, as was the case during the pandemic, fundamentals that typically drive stock movement appear to be being pushed aside.
Shares of GameStop surged 47pc in premarket trading and it pulled other meme stocks along for the ride.
Shares of AMC Entertainment jumped 9pc. Bed Bath & Beyond's stock climbed more than 11pc and Virgin Galactic rose more than 3pc.
Palantir and Nokia, also considered meme stocks, rose as well.
Savers left stranded by sudden jump in inflation
Savers face losing thousands to rising inflation, despite vast improvements in the best-paying accounts.
Charlotte Gifford has taken a look at the market:
The rate of inflation leapt unexpectedly to 10.4pc in February, up from 10.1pc. Economists had predicted the rate to fall this month.
The latest inflation spike is likely to cast doubt over the Office for Budget Responsibility’s prediction that inflation will reach 2.9pc at the end of the year.
No savings account carries a rate that comes close to the double-digit figure, leaving savers exposed to the corrosive impact of rising prices.
Read what customers with average easy access account will lose in real inflation terms.
Wall Street on track for tentative open
US stock indexes have been subdued in pre-market trading ahead of the outcome of the Federal Reserve's rate-setting meeting.
Traders have halved the size of the expected interest rate increase to 25 basis points following troubles in the banking sector, with analysts saying a pause was unlikely as it would indicate the turmoil had rattled the Fed.
The US central bank's two-day policy meeting will end at 6pm UK time, with investors keenly awaiting Fed Chairman Jerome Powell's conference at 6.30pm to gauge the central bank's rate-hike trajectory.
Wall Street's main indexes notched gains in the past two straight sessions, after the rescue of Credit Suisse as well as measures by central banks to boost liquidity helped soothe some worries about risks to other banks.
In pre-market trading, the Dow Jones Industrial Average and S&P 500 were flat with futures on the Nasdaq 100 down 0.1pc.
Banks raise markets after Credit Suisse turmoil
Banking stocks are continuing their recovery following the collapse of Silicon Valley Bank and rescue of Credit Suisse.
Banks have risen 2.4pc across the FTSE 350, helping to lift the FTSE 100 up. The blue chip index is roughly flat on the day after earlier losses.
Shares in HSBC have risen 3pc, Barclays is up 2.8pc, NatWest has gained 2.3pc and Lloyds has risen 1.6pc.
However, all remain well below their price before the first signs of trouble at Silicon Valley Bank on Wednesday, March 8.
Barclays is down about 13pc since them, with HSBC off by 10pc, and NatWest and Lloyds about 5pc below those levels.
In Europe, UBS shares have erased almost all of the losses made during the recent banking rout, emerging the rare winner from the historic rescue deal for rival Credit Suisse.
The Swiss lender is leading gains among European banks this week, as fears around the stability of the finance sector eased after its emergency takeover of Credit Suisse.
Shares gained as much as 3.6pc to 20.12 Swiss francs.
Oil prices fall back ahead of rate decisions
Oil prices have fallen ahead of the US Federal Reserve's interest rate decision later today.
Brent crude oil, the international benchmark, has dropped by 0.3pc towards $75 a barrel after a 2.9pc rally on Tuesday.
US-produced West Texas Intermediate futures have also fallen 0.3pc and traded near $69 a barrel after rising almost 4pc over the previous two days amid an easing of concerns over banking industry
The turmoil drove oil to a 15-month low last week and whipped up volatility across global markets.
Now traders are awaiting the next moves on interest rates.
Markets are pricing in a roughly 80pc chance that the Fed will hike rates by a quarter point this evening.
In the UK, markets have priced in as much as a 99pc chance that interest rates will rise by 25 percentage points to 4.25pc on Thursday.
Full-fibre broadband rollout hits 10m milestone
Openreach is pressing ahead with plans for full-fibre broadband to reach 25m premises after announcing it is now available to 10m homes, businesses and public services across the UK.
The 10 millionth location is in the village of Ketton in Rutland.
More than 900 homes and businesses in this rural location can now order an ultrafast full-fibre connection.
The £15bn project is intended to hook up 25m homes and businesses across the country by the end of 2026.
As well as improving the broadband that people use on a daily basis, the upgrade is set to improve the quality of UK public services, said Openreach.
Banking turmoil may increase impact of rising interest rates, warns Lagarde
The European Central Bank's interest rate increases are just starting to take effect on the economy but their effect may become stronger as a result of banking turmoil, ECB President Christine Lagarde has said.
Investors are pondering whether the ECB will be able to continue raising rates to fight high inflation despite turmoil in the banking sector.
Ms Lagarde said the ECB's actions to raise borrowing costs may be magnified if banks become more risk averse and start demanding higher rates when lending - likely implying the central bank would need to increase its own rates by less.
She said: "If, for example, banks start to apply a larger 'intermediation wedge' – meaning that at any level of the base rate they demand a higher compensation for the perceived risk they are taking on when lending – then pass-through will become stronger."
She reaffirmed the ECB's determination to bring inflation in the euro zone to 2pc, from 8.5pc last month, and noted past hikes were only just starting to be passed onto the economy.
She added: "For inflationary pressures to ease, it is important that our monetary policy works robustly in the restrictive direction. And that process is only starting to take effect now."
House prices rising as market 'on course for months ahead'
Average UK house prices increased by 6.3pc in the 12 months to January, according to the Office for National Statistics.
This was down from 9.3pc annual growth in December.
The average UK house price was £290,000 in January, which was £17,000 higher than 12 months earlier.
Average house prices increased over the 12 months to £310,000 (a 6.9pc annual increase) in England, £217,000 in Wales (5.8pc), £185,000 in Scotland (1pc) and £175,000 in Northern Ireland (10.2pc).
Nick Leeming, chairman of estate agent Jackson-Stops, said:
Despite economic headwinds, the property market remains on course for the months ahead, with only a marginal decrease in house prices reported despite many predicting a more dramatic decline.
Much of this data reflects the fallout from autumn's Trussonomics, where now, as we move into the spring, we are seeing a much more healthy market with more listings as well as buyers, as people renew their search after putting purchases on hold for longer than usual at the end of last year.
Resilience is the new buzz word for housing, with what could be a surprisingly bright summer ahead.
UK average house prices increased by 6.3% in the year to January 2023, down from 9.3% in December 2022.
➡ https://t.co/CScJdqrgcE pic.twitter.com/uo7cCIMHw5
— Office for National Statistics (ONS) (@ONS) March 22, 2023
Virgin Orbit close to £162m US venture capital deal
Richard Branson's cash-strapped Virgin Orbit is near a deal for a $200m (£162.7m) investment from Texas-based venture capital investor Matthew Brown via a private share placement, according to reports.
A successful deal would be a major boost of confidence in the satellite launch company that saw its market capitalisation slump to a record low of $150m on Tuesday from more than $3bn two years ago when it went public.
Virgin Orbit has been grappling with dwindling cash and mounting losses as space startups struggle with rocket launches in a highly competitive market.
Its rocket LauncherOne in January failed a mission to deploy nine small satellites into lower Earth orbit due to an anomaly during its flight through space.
Virgin Orbit has received about $35m of capital injections from Mr Branson's Virgin Investments in recent months.
It said last week it was exploring strategic options and was in talks for fresh funding after a cash crunch forced it to pause operations and furlough nearly all its staff.
Virgin Orbit and Matthew Brown are aiming to close the deal on Friday, according to a term sheet seen by Reuters, which is not binding and remains subject to final agreement.
Fever Tree shares jump despite hit from rising glass costs
Fever Tree shares jumped as much as 10pc as its full-year results beat expectations, even as it admitted it was being squeezed by rising costs.
The tonics and mixers maker revealed pre-tax profits fell 44pc to £31m amid high glass costs.
However, it said that revenues should come in this year somewhere between £390m and £405m, ahead of analyst expectations.
The company is taking measures to cut costs like increasing its local US production and increasing prices.
Meanwhile, falling energy prices and freight costs are expected to boost its margins.
Amazon increases pay as minimum wage rises
Amazon has announced it is increasing the base pay for its British workers from the start of next month to keep ahead of the rising minimum wage.
The online giant said minimum starting pay for its 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 but has announced this week 9,000 more global job losses, adding to 18,000 cuts it announced in January.
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.
However the £10.50 that Amazon workers are currently paid would not have broken the new rules, which will see minimum pay rise to £10.42 per hour from the start of next month. 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 10pc, and by more than 37pc since 2018.
We also work hard to provide great benefits, a positive work environment and excellent career opportunities.
European gas prices fall
European natural gas prices have fallen, resuming their downward trend this year which, it is hoped, will ease inflation.
Dutch front-month futures, the continent's benchmark, have fallen 0.9pc to about €42 per megawatt hour, having climbed 5.9pc on Tuesday.
It comes after the weather turned windier and colder in some parts of the continent, while strikes in France have disrupted three of four natural gas terminals in the country.
However, European gas prices have fallen 45pc so far this year as storage levels remained high after a warmer than average winter.
Inflation spurs unions to fight for higher pay
The rise in inflation shows that workers have no choice but to fight for better wages, according to union leaders.
Double-figure inflation has helped fuel the wave of strikes across the country for several months, and today's data will do little to help resolve the disputes.
Unite union general secretary Sharon Graham said:
Inflation is back on the rise and workers continue to be hammered by high prices.
Unite's own research shows that it's profits propelling inflation, while workers' wages struggle to keep up.
There's no end in sight to the cost-of-living crisis and people are sick of seeing their budgets get stretched thinner and thinner every month while big business racks up record profits.
Unite's ongoing fight to win better jobs, pay and conditions continues.
TUC general secretary Paul Nowak said: "Families are still under massive pressure from the rising cost of living, with food prices rising especially fast, but they got next to no help from last week's Budget.
"We need a comprehensive plan to get wages rising across the economy, and to boost social security. That's how we build an economy that rewards work not wealth."
Markets fall as traders price in Bank of England rate increase
The FTSE 100 opened lower as the pound gained strength following a hotter-than-expected UK inflation reading, with rate sensitive real estate stocks leading declines.
London's exporter-heavy blue-chip index fell 0.3pc, after gaining nearly 2pc on Tuesday.
Investors are also awaiting the US Federal Reserve's decision on monetary policy tightening later in the day.
The pound rose sharply against the dollar after British consumer price index (CPI) inflation unexpectedly rose to 10.4pc in February.
Traders are now fully pricing in a 25 basis point interest rate hike by the Bank of England at its monetary policy meeting on Thursday.
The more domestically-focussed FTSE 250 midcap index also shed 0.5pc.
The British Land Company fell 5pc after Morgan Stanley reduced its price target on stock, taking the broader real estate index down 1.5pc.
Bank of England's job 'not yet done,' says IoD
After the unexpected rise in UK inflation, Institute of Directors chief economist Kitty Ussher said:
Clothing prices often rise in February as fresh stock is brought in following the new year sales, but this year the change was particularly steep.
Cafes and restaurants meanwhile have been hit by the triple whammy of higher wage, energy and food costs forcing a rethink of their pricing strategies.
In recent days some have suggested that the febrile environment in the banking sector should give central banks pause for thought before raising rates further.
Today’s data suggests the opposite; the Bank of England's job is not yet done.
Vistry profits pushed down by fire safety costs
Housebuilder Vistry has said its profit dropped by more than a fifth last year as it set aside cash to make buildings fire safe in the wake of the 2017 Grenfell Tower fire.
The builder - formerly known as Bovis Homes - said that it had set aside £97m during the year, helping to push down pre-tax profit by 22.5pc to £247.5m.
Stripping out one-off costs, adjusted pre-tax profit hit £418.4m, up 20.9pc on the year before.
Vistry said it expects adjusted pre-tax profit to rise to around £400m this year.
FTSE 100 falls after inflation rises
The markets have opened lower after the unexpected rise in inflation increased pressure on the Bank of England to raise interest rates.
The FTSE 100 has fallen 0.2pc after the open to 7,519.10 while the domestically-focused FTSE 250 has dropped 0.1pc to 18,764.97.
Inflation shows Hunt should have cut energy bills, says Olney
Liberal Democrat Treasury spokesperson Sarah Olney said the rise in inflation last month was "just more proof why the Chancellor should have cut energy bills in the budget". She said:
Instead he sat on his hands and we are left with rising inflation once more.
People across the country are struggling and the Government has failed totemically to support hardworking families and pensioners.
The Conservatives' record on the cost-of-living crisis has been nothing short of a disaster, people shouldn't have to pay the price for this Government's economic omnishambles.
Not raising interest rates might be a 'mistake,' says NIESR
The Bank of England might be making a mistake if it does not raise interest rates tomorrow, according to a think tank.
Paula Bejarano Carbo, associate economist at the National Institute of Economic and Social Research, said:
Taken together, the data suggests that inflationary pressures in the economy have yet to be tamed.
Despite these elevated figures, markets do not expect the Monetary Policy Committee to raise its policy rate tomorrow in the wake of the current financial market turbulence.
Given today's data, and the expected effect of incoming wage rises on inflation in the coming months, we wonder if this would be a mistake.
Rising inflation 'may force 25bps rate hike'
The unexpected rise in inflation to 10.4pc in February "may be enough to tilt the Bank of England towards raising interest rates" from 4pc to 4.25pc, according to Capital Economics.
Chief UK economist Paul Dales said the most "worrying" element of the data from the Office for National Statistics was the rebound in core inflation from 5.7pc to 6.2pc. He said:
These inflation figures smell a little like the recent US experience, where it appeared that core inflation was easing rapidly a few months ago only for it to accelerate again as economic activity proved resilient.
The recent tightening in financial conditions caused by the banking turmoil will probably weaken UK economic activity and underlying price pressures.
But the Bank of England may well want to see hard evidence of that before it stops raising interest rates.
It's still a very close call, but these figures give us a bit more confidence in our forecast that the Bank will raise interest rates from 4pc to 4.25pc tomorrow.
Pound spikes as inflation unexpectedly rises
The pound shot up after the Office for National Statistics revealed that inflation unexpectedly increased in February, increasing pressure on the Bank of England to raise interest rates.
Against the dollar, the pound has risen 0.4pc and is heading in the direction of $1.23.
Sterling has also gained nearly 0.5pc against the euro, with is worth less than 88p.
Inflation 'looking more benign' as year progresses, says CBI economist
The CBI's lead economist has said that despite the spike in inflation, the Bank of England will be faced with falling prices over the course of the year.
Alpesh Paleja said that even though inflation rose last month, "the outlook for the months ahead is looking more benign". He said:
But while we expect inflation to fall back over this year, the firmness in domestic price pressures is something that the Bank of England will be keeping a close eye on.
And despite further falls over the coming months, this year will still be a high-inflation environment for both households and businesses.
3. The cost of living crisis in the UK had another reality check & things are still very difficult out there and no signs of easing off, which means that the BOE will need to do more.
All eyes will be on the BOE’s meeting tomorrow, which we believe will increase rates by 25 bp
— Naeem Aslam (@NaeemAslam23) March 22, 2023
'Families are feeling worse off,' says Reeves
Shadow chancellor Rachel Reeves said:
The reality is that under this Tory Government, families are feeling worse off and nothing is working better than it did 13 years ago.
The cost-of-living crisis is still biting hard and taxes are rising, yet the Government chose to use the Budget to hand a £1bn bung to the top 1pc.
Labour will stand with working people and with our mission to secure the highest sustained growth in the G7, make families across every part of our country feel better off.
Food prices rise at highest rate in 45 years
UK inflation shot up unexpectedly last month as vegetable shortages pushed food prices to their highest rate in more than 45 years, according to official figures.
The surprise jump in inflation comes after food and non-alcoholic drinks prices rose by 18pc year-on-year last month, up from 16.7pc in January and the highest since August 1977.
Shortages of vegetables such as tomatoes and peppers in recent weeks were largely behind the rocketing food inflation.
Here is how inflation has changed over the last 10 years:
Bank of England raising rates to fight inflation risks recession, says Premier Miton
Emma Mogford, fund manager, Premier Miton Monthly Income Fund, said:
These additional inflationary pressures are clearly a problem for the Bank of England.
Increasing interest rates to fight inflation could push the UK economy into a recession later this year.
Companies will continue to feel a squeeze on profits from rising costs as well as higher interest payments.
Hunt: We need to stick to our plan on inflation
As inflation increased unexpectedly in February, Chancellor Jeremy Hunt said:
Falling inflation isn't inevitable, so we need to stick to our plan to halve it this year.
We recognise just how tough things are for families across the country, so as we work towards getting inflation under control we will help families with cost of living support worth £3,300 on average per household this year.
Rising inflation creates headache for Bank of England
Rising food prices meant UK inflation increased in February, surprising forecasters and increasing pressure on the Bank of England to make more interest rate rises.
Economics reporter Melissa Lawford has the latest:
On a monthly basis, CPI rose by 1.1pc in February - faster than the 0.8pc monthly growth recorded a year earlier, according to the Office for National Statistics.
The largest contributor to the monthly change came from rising costs in restaurants and cafes, food prices and clothing.
The surprise will create a headache for the Bank of England, which will meet on Thursday to decide whether to raise interest rates up from 4pc to cool inflation. CPI is more than five times the Bank's 2pc target.
Fruit and vegetable rationing drives food and drink prices higher, says ONS
The Office for National Statistics' chief economist Grant Fitzner said:
Inflation ticked up in February mainly driven by rising alcohol prices in pubs and restaurants following discounting in January.
Food and non-alcoholic drink prices rose to their highest rate in over 45 years with particular increases for some salad and vegetable items as high energy costs and bad weather across parts of Europe led to shortages and rationing.
These were partially offset by falls in the cost of motor fuel, where the annual inflation rate has eased for some seven months.
Rising price of food and restaurants behind increasing inflation
The increase in the annual inflation rate was mainly due to price rises in the restaurants and hotels, food and non-alcoholic beverages, and clothing and footwear divisions.
The rising costs of goods leaving factories and of raw materials were also reasons for the unexpected increase in inflation last month.
Economists had forecasted that inflation would fall to 9.9pc in February.
Annual inflation rates rise again following the easing in Jan 2023:
▪️ Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 9.2% in the 12 months to Feb 2023, up from 8.8% in Jan 2022
▪️ CPI rose by 10.4%, up from 10.1%
➡ https://t.co/VVfmybQmsG pic.twitter.com/l1dXAi7yyk
— Office for National Statistics (ONS) (@ONS) March 22, 2023
Inflation has increased to 10.4pc, handing a blow to the Bank of England ahead of its decision on the next move for interest rates tomorrow.
Policymakers have faced calls from analysts to slow the pace of interest rate rises to ease the pressure on the global banking system.
5 things to start your day
1) State pension age plan shelved as life expectancy falls | Plus: How the pandemic blew up Jeremy Hunt’s plan to raise the state pension age
2) Jeremy Hunt to press ahead with ‘Big Bang 2.0’ despite banking crisis | Chancellor’s plans to slash red tape could introduce more risk to fragile financial system
3) ‘Anti-competitive’ Brussels plot to shift City clearing houses slammed by investors | Proposals will undermine efficiency and increase costs in the City, investors claim
4) FTSE 100 companies now make more money in the US than the UK | Analysis fuels fears of an exodus of companies after a series of high-profile defections
5) Second-hand electric car prices fall as demand dwindles | Glut of stock hits the market as drivers trade their used cars in
What happened overnight
Asian shares staged a cautious bounce on Wednesday with hopes a global banking crisis would be averted vying with uncertainty over the outlook for US interest rates.
Unease left both S&P 500 futures and Nasdaq futures barely changed. EUROSTOXX 50 futures edged up 0.2pc, while FTSE futures climbed 0.1pc.
MSCI's broadest index of Asia-Pacific shares outside Japan gained 0.9pc, with Chinese blue chips up 0.3pc. Japan's Nikkei firmed 1.6pc led by a rebound in beaten-down bank stocks.
Stocks rose in Australia and futures for benchmarks in Japan and Hong Kong advanced. Australian and New Zealand government bond yields rose, tracking the action in the Treasury market on Tuesday.
Shares in US lenders rebounded as fears of a global banking crisis eased, lifting Wall Street's main equity indexes ahead of the Federal Reserve's highly-anticipated interest rate decision.
The Dow Jones Industrial Average rose 316 points or 0.98pc to 32,560.60. The S&P 500 jumped 1.3pc to 4,002.87, while the tech-rich Nasdaq Composite climbed 1.58pc to 11,860.11.
Extreme volatility in short term government bonds dragged into the nine consecutive day, with traders betting on another 25 basis-point interest rate hike. The policy sensitive two-year Treasury yield surged as much as 21 basis points to 4.18pc.
On the other side of the Atlantic, the FTSE 100 index closed 1.79pc higher at 7,536.22, marking its best performance in over four months. The exporter-heavy index was boosted by a week pound, alongside a rally on bank stocks which surged 3.34pc across the FTSE 350.