Janet Yellen urges caution over rate rises, after Brexit fears hit City – as it happened

All the day’s economic and financial news, as the head of the Federal Reserve speaks in New York

Latest: Yellen urges caution on rate risesSummary: Bank of England’s Referendum warningLarry Elliott: Bank of England is in the thick of Brexit debate

8.12pm BST

And finally, here’s our news story about Janet Yellen’s speech…and some more hawkish comments from other Federal Reserve policymakers:

Related: Fed officials hint at interest rate hikes but Janet Yellen urges caution

5.39pm BST

The odds of the Federal Reserve hiking interest rates this summer have just fallen.

That’s according to the latest market data from Wall Street:

* U.S. FED funds futures imply traders see 46 pct chance of FED hiking rates in July, down from 51 pct Monday – cme’s fedwatch

* U.S. FED funds futures imply traders see 56 pct chance of FED hiking rates in September, down from 63 pct Monday – cme’s fedwatch

5.38pm BST

Echoing the Bank of England this morning, Janet Yellen also warns that the economic outlook has deteriorated recently.

Yellen: Foreign econ growth and U.S. earnings look worse now than last Dec

5.34pm BST

LIVE now on CNBC TV & https://t.co/vpyWbW9sWJ » Fed Chair Yellen speaks from New York Economic Club pic.twitter.com/lJDsRXmFgQ

Fed chair Janet Yellen is also warning that China’s slowing economy is a potential threat to the global economy.

One concern pertains to the pace of global growth, which is importantly influenced by developments in China. There is a consensus that China’s economy will slow in the coming years as it transitions away from investment toward consumption and from exports toward domestic sources of growth. There is much uncertainty, however, about how smoothly this transition will proceed and about the policy framework in place to manage any financial disruptions that might accompany it. These uncertainties were heightened by market confusion earlier this year over China’s exchange rate policy.

For the United States, low oil prices, on net, likely will boost spending and economic activity over the next few years because we are still a major oil importer. But the apparent negative reaction of financial markets to recent declines in oil prices may in part reflect market concern that the price of oil was nearing a financial tipping point for some countries and energy firms. In the case of countries reliant on oil exports, the result might be a sharp cutback in government spending; for energy-related firms, it could entail significant financial strains and increased layoffs. In the event oil prices were to fall again, either development could have adverse spillover effects to the rest of the global economy.

Yellen dovish, like two weeks ago: highlights concerns over global growth and inflation expectations https://t.co/7mrAQ6Z8Gv

5.29pm BST

America’s top central banker, Federal Reserve chair Janet Yellen, is speaking to the Economic Club of New York right now.

And Yellen is dropping a hint that US interest rates are likely to only rise modestly in the months and years ahead.

I consider it appropriate for the Committee to proceed cautiously in adjusting policy. This caution is especially warranted because, with the federal funds rate so low, the FOMC’s ability to use conventional monetary policy to respond to economic disturbances is asymmetric.

If economic conditions were to strengthen considerably more than currently expected, the FOMC could readily raise its target range for the federal funds rate to stabilize the economy. By contrast, if the expansion was to falter or if inflation was to remain stubbornly low, the FOMC would be able to provide only a modest degree of additional stimulus by cutting the federal funds rate back to near zero.

Markets Now: Dow, S&P 500 take sharp jump higher after Yellen comments » https://t.co/rtSdqa2OJM pic.twitter.com/yAEeCrpUlD

5.22pm BST

After a choppy day’s trading, the FTSE 100 finished the session almost exactly where it started.

London’s blue chip index has closed down half a point, at 6105.90. Retailers led the risers, with Marks & Spencer and Associated British Foods both gaining 3%.

The shadow of Brexit looms large over financial markets with investors, companies and the government unable to make cast iron decisions until the result is known. Much like the Scottish referendum this one looks set to go down to the wire, so expect market volatility to be heightened as we close in on the vote.

5.14pm BST

Over in America, consumer confidence has jumped unexpectedly.

The monthly Consumer Confidence Index jumped to 96.2 in March, beating forecasts of a small rise to 94.

March #US Conference Board consumer confidence, % saying jobs plentiful, flat at very high levels for a year now pic.twitter.com/M3xzYeQQ1M

2.18pm BST

Mark Carney has been trying his best to avoid being dragged into the EU referendum issue.

When he testified to MPs three weeks ago, the BoE governor argued that Brexit was more than a financial issue, and wouldn’t give any forecasts about growth or employment after the vote.

Related: Bank of England clamps down on buy-to-let lending

Related: Port Talbot steel plant hangs in balance as Tata meets in Mumbai

Eurozone financial repair continues, just really, really slowly. pic.twitter.com/Tk24pPNTLc

#Brent below $40 on stronger USD, evaporating confidence in a positive outcome of OPEC/non-OPEC members’ meeting, and rise in US oil storage

1.32pm BST

Campaigners to leave the EU are (understandably) less alarmed by the Financial Policy Committee’s concerns.

Matthew Elliott, chief executive of Vote Leave, argues that Britain’s economy would be more, not less, secure out of the EU.

‘The biggest risk to the UK economy, a risk that even the Bank of England acknowledges, is Britain remaining in a declining political union where we are outvoted and our trade is held back.

Even pro-EU campaigners have admitted that after we Vote Leave on June 23rd we will secure a deal where the economy will grow and jobs will be created. The safest thing for our economic security is to spend our money on our priorities.’

1.15pm BST

Campaigners to stay in the European Union are seizing on the Bank of England’s warning that Brexit is a threat to UK financial stability.

The independent assessment that uncertainty around the UK’s membership of the EU is ‘the most significant near-term domestic risk to financial stability’ will be a major worry for everyone whose job and income depends on the long-term health of Britain’s economy.

“This assessment makes it clear our economy would be more vulnerable and less resilient if we vote to leave the EU – leading to higher mortgage rates for families and higher interest rates for Britain’s businesses.

1.01pm BST

Jeremy Leaf, north London estate agent, isn’t impressed by the Bank of England’s new clampdown on buy-to-let lending.

Leaf, a former chairman of the RICS trade body, argues that recent measures announced by the UK government will cool the market.

The changes the Chancellor has made to mortgage interest tax relief and higher stamp duty for landlords will have enough of an impact on buy-to-let without the need for further interference from the Bank of England.

Landlords will already be put off investing further unless the numbers add up and this is a case of kicking them when they are down.

12.40pm BST

As we suspected, the Bank of England is keen to take the heat out of the buy-to-let mortgage market.

The BoE will push small mortgage lenders to enforce higher standards, including tighter checks on landlords’ income and the impact of new stamp duty rates on BTL mortgages.

On buy-to-let lending, the committee said: “The FPC remains alert to potential threats to financial stability from rapid growth in buy-to-let mortgage lending.”

The committee, chaired by the governor, Mark Carney, said it expected measures announced by the Bank’s regulatory arm, the Prudential Regulatory Authority, to dampen the market.

12.29pm BST

Augustin Eden, analyst at City firm Accendo Markets, sums up the Bank of England’s message:

June’s Brexit referendum could both push up borrowing costs AND weaken Sterling, according to the Bank of England’s Financial Policy Committee. Of course, the reason for a rise in borrowing costs won’t be an interest rate hike by the central bank, it’ll be increased risk.

12.24pm BST

Update: That Brexit opinion poll is closer than you might think…..

Our latest – 49% IN and 41% to LEAVE #euref but – once we factor in turnout, much closer: 48% In and 46% LEAVE https://t.co/9zAcNL0uCK

12.19pm BST

Bang on cue, a new opinion poll has shown that European Union referendum battle has got tighter.

A poll for the Evening Standard newspaper gives the Remain campaign an eight point lead, at 49% vs 41% to Leave.

Latest Evening Standard / IPSOS #Brexit poll shows 49% to remain and 41% to leave

12.01pm BST

UK government insiders are briefing that the Bank of England’s Brexit comments are an important contribution to the debate ahead of June’s referendum.

However, Sky News’s Ed Conway reports that the Bank doesn’t share this enthusiasm:

Behind the scenes HMT is briefing that the BoE statement today represents a new warning on Brexit. BoE briefing there is nothing new today

11.53am BST

This morning’s stock market rally is fizzling out, in the face of the Bank of England’s gloomy prognosis.

The FTSE 100 is just 3 points higher (having jumped nearly 50 points at the start of trading).

11.30am BST

Britain could suffer a credit crunch if the public vote to leave the European Union in the referendum on June 23, the Bank of England claims.

The BoE’e Financial Policy Committee warns that uncertainty over Brexit has already hit the pound, and driven up the cost of insuring against a sterling crisis.

Looking ahead, heightened and prolonged uncertainty has the potential to increase the risk premia investors require on a wider range of UK assets, which could lead to a further depreciation of sterling and affect the cost and availability of financing for a broad range of UK borrowers.

The financing of that deficit is reliant on continuing material inflows of portfolio and foreign direct investment. Those flows have contributed to the financing of the public sector financial deficit and corporate investment, including in commercial real estate. Heightened uncertainty could test the capacity of core funding markets at a time when the liquidity of these markets has shown signs of fragility across advanced economies.

The impact of a decision of the United Kingdom to withdraw from the European Union could spill over to the euro area, driving up risk premia and further diminishing the prospects for growth there.

11.16am BST

Newsflash: The Bank of England is warning that the outlook for financial stability in the United Kingdom has deteriorated over the last four months.

In a new report, the Bank’s Financial Policy Committee cites the slowdown in the Chinese economy, weaker growth across the globe, and recent market turbulence.

Some pre-existing risks have crystallised, drawing on the resilience of the system. Other risks stemming from the global environment have increased. Domestic risks have been supplemented by risks around the EU referendum.

In an environment of low inflation and continued weakness in investment and productivity growth, prospects for global nominal growth are subdued.

This raises questions about resilience to future adverse shocks, particularly for emerging market economies where debt levels continue to rise and terms of trade have deteriorated. In this environment, the re-acceleration of credit growth in China is concerning.

11.07am BST

Anticipation is building in the City, ahead of Federal Reserve chair Janet Yellen’s speech today (at around 4.30pm BST).

Yellen is due to deliver a speech called “Economic Outlook and Monetary Policy” at the Economic Club of New York luncheon.

The dollar has started to recover at least some of the ground it has lost in the last week. Investors now await Federal Reserve Chair Yellen’s speech this afternoon for more news on the possibilities of future US interest hikes.

10.55am BST

Natural resource stocks aren’t sharing in today’s rally.

Instead, mining stocks are leading the fallers in London, as a stronger US dollar hits commodity prices.

UK miners are enjoying their usual habitat – back in the red….

Weaker growth in developed markets and word that China is building inventories rather than utilising for construction coupled with the strong dollar would indicate that the 15% gain in copper since mid-January has been built on sand.

10.37am BST

Oversupply worries are dragging the oil steadily lower this morning.

Brent crude is now down almost 2% at $39.53 per barrel, with analysts citing the regular concerns about weak demand and an oversupply glut.

10.25am BST

While Tata Steel’s board decides the fate of Port Talbot’s steelworkers, UK politicians have been bickering about whose fault it all is.

Over to the Press Association:

Business Minister Anna Soubry said the Government was prepared to consider “all options” to ensure that steel production continued at the South Wales site.

“We are looking at all manner of options that may or may not be available to us as a Government, all options,” she told BBC Radio 4’s Today programme

9.47am BST

Hold onto your hats, folks. We have some encouraging financial data from Europe.

Bank lending to eurozone businesses rose by 0.9% in February, up from 0.6% in January. That indicates that companies are becoming more confident and looking to borrow to fund new plans.

Eurozone credit crunch further eased in Feb. ECB says Eurozone bank lending to Firms & Households accelerated in Feb pic.twitter.com/6mRP1Xujcv

Pick up in #Eurozone lending continued in Feb. Consumer far ahead of business. @ecb measures will boost further pic.twitter.com/Tmzd8zu7I9

9.30am BST

Europe’s stock markets are up across the board:

9.23am BST

Shares in oil exploration firm Rockhopper have slumped by 10% after a United Nations commission ruled that the Falklands Islands fall within Argentina’s territorial waters.

Rockhopper has been drilling around the Falklands for several years, and in January it announced it had discovered oil off the northern coast.

The Argentine foreign ministry said its waters had increased by 1.7 million square km (0.66 million square miles) and the decision will be key in its dispute with Britain over the islands. Argentina lost a brief, bloody 1982 war with Britain after Argentinian troops seized the South Atlantic archipelago that Latin Americans call the Malvinas.

The UN commission on the limits of the continental shelf sided with Argentina, ratifying the country’s 2009 report fixing the limit of its territory at 200 to 350 miles from its coast.

Related: Falkland Islands lie in Argentinian waters, UN commission rules

8.51am BST

The mood in the City right now:

Having Monday off provides an opportunity to hate Tuesday’s #backtowork

8.42am BST

Over in Mumbai, British union leaders have made a last-ditch attempt to persuade steel giant Tata to keep supporting Wales Port Talbot plant.

Related: Union leaders appeal to Tata Steel ahead of meeting to decide industry’s future

8.40am BST

Tony Cross of Trustnet Direct suspects today’s rally won’t last long.

Following a slump on Thursday, which was induced by a strengthening dollar, falling commodities and a downbeat update from Next, this looks like an opportunistic bet by investors eager to make a quick buck and buy on the dips.

Given the index’s recent tumultuous form it is hard to see this being sustained…

8.23am BST

European stock markets have opened higher this morning as traders return to their desks after the Easter break.

The main indices have risen by at least 0.5% at the open, as traders ponder the strength of the recent rally since the turmoil of January and early February.

“It is certainly not a global economic backdrop where one could say that a lot of clarity is on offer at present.”

Over the last couple of weeks European markets have struggled to move meaningfully in either direction, contained by a stabilisation in commodity prices, slightly less concern about the Chinese economy, and commitments to slightly looser policy from the Bank of Japan, European Central Bank and the Peoples Bank of China.

8.08am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

It’s a nerve-wracking day for Britain’s steel industry. Top executives at India’s Tata are meeting in Mumbai to decide whether to continue supporting its operation in Port Talbot.

The interest rate markets see a further hike in June as a 36% probability, so in theory, Ms Yellen only really needs to acknowledge the improvement in inflation forces and we could see the US dollar rally.

Continue reading…

Bank of England warns that vote to leave EU risks a credit crunch

Financial policy committee also warns of possible run on sterling and higher interest rates for mortgages in boost for remain side

The Bank of England has given David Cameron a significant boost ahead of the EU referendum by warning that a vote to leave risks causing a run on sterling, a credit crunch and higher interest rates for mortgage payers and businesses.

Threadneedle Street said the closely fought campaign posed the “most significant near term” domestic risk to financial stability, after one of its key policy committees weighed up the consequences of Britain ending its 43-year relationship with the EU.

Related: Whether it likes it or not, Bank of England is in the thick of Brexit debate

Related: Bank of England must burst the buy-to-let bubble now

Continue reading…

Fed officials hint at interest rate hikes but Janet Yellen urges caution

Federal Reserve chair says economic uncertainty contributed to decision to delay rate hike twice this year, and expects only ‘gradual increases’ in the future

Global economic uncertainty including the slowdown in China and collapsing oil prices led to the delaying of an interest rate hike in both January and March, the Federal Reserve chair, Janet Yellen, said on Tuesday. Urging caution, Yellen said she expects “only gradual increases” to be warranted in the future.

“Importantly, this forecast is not a plan set in stone that will be carried out regardless of economic developments,” Yellen said. “Instead, monetary policy will, as always, respond to the economy’s twists and turns so as to promote, as best as we can in an uncertain economic environment, the employment and inflation goals assigned to us by the Congress.”

Related: Weak US consumer spending expected to delay interest rate rise

Related: Weak US consumer spending expected to delay interest rate rise

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Buy-to-let mortgage clampdown: are you worried?

Are you a buy-to-let landlord or tenant? We want to hear your thoughts on the Bank of England’s new lending conditions

Buy-to-let is one of the biggest domestic risks to the financial system the Bank of England has warned. The Bank’s financial policy committee (FPC) is concerned that the sector has potential to cause a new property crash, with borrowers possibly over-stretched by potential interest rate rises and changes to mortgage tax relief.

We’d like to hear from buy-to-let landlords – and their tenants.

Related: Bank of England clamps down on buy-to-let lending

Continue reading…