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Bank of England deputy opposes rate hike, as UK house prices rebound – business live

All the day’s economic and financial news, as BoE deputy governor Sir Jon Cunliffe joins the widening split over interest rates

Sir Jon Cunliffe has “drawn the battle lines” for August’s monetary policy committee meeting by arguing against an early interest rate rise, says Bloomberg’s Lucy Meakin.

Here’s a flavour of her piece:

While some members of the BOE’s rate-setting committee have argued that consumer-price inflation of 2.9 percent means an increase in bank rate is required imminently, Cunliffe said that has been driven by the pound’s depreciation since the Brexit referendum and that wage pressures have remained low.

Inflation above the 2 percent target is “not a comfortable place,” Cunliffe said in an interview on BBC radio. However, “we do have to look at what’s happening with domestic inflation pressures and on the data we have at the moment, that gives us a bit of time to see how this evolves.”

#BOE‘s Cunliffe says domestic price pressures buy time on rates via @lucy_meakin

London house price are now rising at the slowest rate since 2012, says Nationwide.

This chart shows how house prices in the UK capital have come off the boil, having outpaced the rest of the country for several years.

London house prices barely rising, weakest annual growth since 2012 – Nationwide

“First came Britain’s electoral map, then its property map. June has seen them both redrawn.

“For London’s house prices to be growing at the second slowest rate in the country would have been unthinkable for much of the past decade.

Jeremy Leaf, north London estate agent, agrees that the rebound in UK house prices in June is “a little surprising”.

He says that current low interest rates helped to push prices up by 1.1% last month, as did is a lack of supply:

‘However, looking forward the shortage of supply and lack of housebuilding are certainly two of the factors supporting the market.

These will need to improve if we are going to see more sustainable growth in housing transactions.

Nationwide shows stronger house price growth in June after weak spring
My current estimate for the change in house prices over 2017 is 1.9%

Odd-looking jump in UK house prices, with stock levels low; but other signals suggesting moderation (Nationwide)

A gentle slide in prices could continue but it’s got less to do with Brexit and more to do with four factors that can be the Four Horsemen of the Apocalypse for markets – inflation, consumer credit, wage growth and mortgage activity – all of which have been dragging their heels recently.

“In May, mortgage approvals hit an eight-month low, wage growth slumped, inflation rose unexpectedly to 2.9%, a near four-year high, and consumer credit also fell dramatically.

Guardian Business has launched a daily email.

Besides the key news headlines that you’d expect, there’s an at-a-glance agenda of the day’s main events, insightful opinion pieces and a quality feature to sink your teeth into each day.

Related: Business Today: sign up for a morning shot of financial news

Now here’s a surprise…. UK house prices have rebounded quite strongly this month, despite a slowdown in London.

Prices rose by 1.1% in June, according to the latest figures from Nationwide, reversing three months of falls. That means the average house costs 3.1% more than a year ago, at £211,301.

“The annual rate of house price growth, which gives a better sense of the underlying trend, continues to point to modest price gains. Annual house price growth edged up to 3.1% from 2.1% in May.

In effect, after two sluggish months, annual price growth has returned to the 3-6% range that had been prevailing since early 2015.

Jon Cunliffe also admitted that the recent surge in inflation, to 2.9%, means the Bank of England isn’t in a “comfortable place” right now.

Bank of England Cunliffe says the MPC is not “in a comfortable place” as civil war rages on the MPC with a clear split in opinions forming.

The split at the Bank of England over when to raise interest rates has widened further this morning, after deputy governor Sir Jon Cunliffe waded in.

“[Consumer spending] is slowing as households’ real incomes are squeezed by higher inflation, we expect some of that slowing to be offset by growth in business investment, growth in exports. And I want to see how that plays out.

(We) do have to look at what’s happening to domestic inflation pressure, and I think that on the data we have at the moment, gives us a bit of time to see how this evolves.”

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

Central bankers are commanding our attention again today. Last night, Federal Reserve chair Janet Yellen gave a rare hostage to fortune by predicting that we’ll probably live out our days without seeing a repeat of the 2008 crisis.

“Would I say there will never, ever be another financial crisis?

“You know probably that would be going too far but I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will be.”

Fed’s Yellen expects no new financial crisis in ‘our lifetimes’

Continue reading…

Middle East At Point Of No Return As Saudi-Qatar Rift Deepens

Authored by Cyril Widdershoven via,

Saudi King Salman’s decision to appoint his son Mohammed Bin Salman (MBS) as the new crown prince did not come as a surprise. For months, the power struggle between former crown prince Mohammed Bin Nayef (MBN) and MBS happened in plain sight, and a confrontation was imminent. However, King Salman made his own calculations and decided to remove MBN in favor of MBS, providing a continuation of his own family line in the future. Over the last week, the media has been overwhelmed with assessments of the House of Saud and the role MBS will play or has been playing. The family feuds in the House of Saud are notorious, whenever a king dies an internal power struggle will emerge, regardless of what strategies have been implemented before.

At present, the Young Prince of Riyadh, Mohammed Bin Salman, has been given the key to power. This has happened at a very difficult time for not only the Kingdom, but also for the whole Gulf region and its neighbors. The choice made by King Salman to promote his son is a remarkable one but could, from a Saudi perspective, be the only viable choice. The need for a 180 degree change in the economic and social policy which keeps Saudi Arabia a strategic regional player is essential. Without radical changes, such as those presented in Vision 2030 or the Aramco IPO project, the Kingdom’s future could be bleak, as the era for “Rentier States” is over.

The challenges MBS faces are enormous. Due to lower hydrocarbon revenues, he will need to change an oil-based economy into a more open, liberal and high-tech economy, capable of taking on global competition in these fields. By opening up the Kingdom via Vision 2030 and the expected billions of dollars from IPO revenues, this could become a reality, not a fata morgana.

A successful economic transformation and increased participation of Saudi youth (including women) could stabilize the Kingdom in the future. MBS relies on this economic transformation to silence opposition inside the House of Saud, as other princes are vying for the crown. While the Saudi leading ulema have pledged allegiance to the new crown prince, the reality remains complex.

Even though MBS holds vast powers and influence at present, the situation is far from stable. King Salman’s royal decree to extend the Eid al Fitr holidays by a week or the reinstatement of financial perks for the military and other government officials, should be assessed as a pay-off and cooling-down period to quell possible opposition.

At the same time, the region is at a point of no return if the Syria-Iran and Qatar issues are not solved soon. The Qatar–Saudi confrontation is still heating up, already threatening a regional conflict, with the possibility of bringing in Iran and Turkey at the same time. Mohammed bin Salman has already been able to tackle the Qatari issue inside of the Kingdom, as former crown prince Mohammed Bin Nayef openly criticized the Arab pressure on Qatar.

After the (perceived) removal from power of MBN, the new crown prince will be able to continue with his own regional strategies, which don’t lack some confrontational features as we have seen already. MBS will for sure up the pressure on Iran, not only in the Syrian proxy war but increasingly in Yemen. The intensifying operations by Houthis and others in the Bab Al Mandab, and a growing missile capability onshore, is not taken lightly by the Saudi military command and MBS. Last week’s terrorist act against a Saudi offshore oil field in the Gulf by Iranian (some indicated Qatari) assailants has only put new oil on the fire. Some could argue at present – without the possible mitigating political cloud of MBN – no real soft approach is being discussed in Riyadh.

MBS will pursue a hardline power strategy to block Iran, Syria’s leaders and Shi’a opposition, while trying to force all Sunni Arab states in the region to follow suit. According to Saudi analysts, one of the main reasons for the current Qatari conflict is the rapprochement with Iran and a growing military presence of Turkey on Qatari soil.

At the same time, the rapprochement between Saudi Arabia and Egypt, as shown by the legalization of the two island deal (Sanafir and Tiran), is another major support for the current hardline position against Qatar. It seems that the Egyptian president and the two young wolves, MBS and Mohammed Bin Zayed (Abu Dhabi), are working well together. A new kind of power brokerage has emerged in the region, the period of traditional Arab politics (based on the Shura approach) is over. Arab regional politics in the 21st Century seems to have embedded Sun Tzu and Clausewitz, leaving no room for traditional pow-wows but only a political and economic Blitzkrieg, until now without diplomacy by other means (military).

On a totally different level, beyond his heavy hand in the Vision 2030 strategy and the defense strategy, MBS is also very well inclined and positioned to decide the coming Saudi strategy for OPEC’s production agreements. The blooming friendship between Russia’s Putin and MBS will strengthen in – the short term – the cooperation between OPEC’s leader and non-OPEC member Russia. Both have the same target, a stabilization of the oil and gas markets, not only to support their own economies, but also as a means to reinforce their military capability. Without a coordinated effort, oil and gas prices will be in limbo. MBS’s love for Putin is also based on the possibility of weakening the Moscow-Tehran cooperation, which is seen by Saudi Arabia and its allies as the main cause of instability in the region.

In stark contrast to former Saudi princes and kings, MBS seems to be able to understand the options of playing many cards at the same time. While putting on a charm offensive for U.S. president Trump, which seems to have worked without any flaws, Riyadh’s new crown prince is opening up to Moscow. A multibillion investment spree partly focused on oil and gas followed. Next to this, the Saudi market opened up for Russian companies such as Rosatom. The combined Russian-US technological push will support Saudi Vision 2030 and will also strengthen the Kingdom’s military power in the region. At the same time, Russian oil companies and technology institutes are preparing themselves for a major gold-rush in the Kingdom. Gazprom, Rosneft, Transneft and others are already booking their tickets to Riyadh and Dammam as the gates to oil and gas heaven have cracked open. A stronger Russia-Saudi oil and gas cooperation is in the offing, leaving less room for others to spoil the fun.

How far the current power surge of the new crown prince will be successful is unclear. MBS is a young prince, even for European standards. If he would become king soon, it is possible that instability would hit the streets before too long. However, if he is able to force Qatar to its knees, removing the possible opposition in Doha and anti-Saudi/Egypt groups (Muslim Brotherhood), some room will be available to deal with the other issues. Looking at the signs in Arab media, a peaceful solution is still far from reachable. Arab leaders show an increasing reluctance to become soft with regards to Qatar. A possible unexpected move should be expected if the demands currently on the table are not met. A full military confrontation could ignite the region.

The latter could involve both Iran and, another major Sunni power, Turkey. Ankara’s ongoing support for Qatar’s political standpoints and support of the Muslim Brotherhood, is not taken lightly by MBS, Sisi and Mohammed Bin Zayed. Turkey’s ongoing cooperation with Russia (military) and Iran (economically) could lead to a confrontation with Saudi-UAE and Egypt in due course. The combination MBS and Sisi should not be underestimated, they are smelling blood already. Putin and Trump are currently sidelined by the ambitions of a young Saudi crown prince. Support for his economic dreams could however take some of the sharp (military) edges of his current strategies. All in all, MBS economic and societal changes are worthwhile to pursue.

Hopefully MBS’s ambitions are not standing in the way of progress. Stability is supportive to global oil and gas markets. Cooperation between OPEC and non-OPEC is needed, not only for financial gains but also to support a sustainable supply of oil and gas in the future. Military conflicts in the Gulf region or instability in Saudi Arabia would destroy this for a long time, without any real other solutions or supply options in the short term. A major disturbance of oil and gas (LNG) supplies from the Gulf could stymie global economic growth. The young prince is ambitious, but hopefully his shoulders are strong enough to bear all the global and regional pressure currently put upon him.