FirstFT: BoE chief economist warns of long-lasting inflation - Financial Times

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High levels of UK inflation could persist for longer than expected, the Bank of England’s new chief economist said, suggesting he agrees with the more hawkish elements of the Monetary Policy Committee.

“In my view, that balance of risks is currently shifting towards great concerns about the inflation outlook, as the current strength of inflation looks set to prove more long-lasting than originally anticipated” — Huw Pill

Much of the recent rise has stemmed from the increasing costs of imported goods, as well as international commodity prices, which are expected to be temporary as supply bottlenecks in semiconductors and shipping normalise. “But the magnitude and duration of the transient inflation spike is proving greater than expected,” he argued.

Pill’s view suggested the chief economist could vote in favour of an early rise in interest rates.

Markets expect a 15 basis point rate rise by February, with the likelihood of the first increase in December. Traders are betting on interest rates rising from the level of 0.1 per cent to 0.75 per cent by the end of 2022.

Thanks for reading FirstFT Europe/Africa. Here’s the rest of today’s news — Jennifer

Five more stories in the news

1. Deloitte under investigation over audit of Essar Oil UK Prompted by a complaint in August, the Big Four group is under investigation over its auditing of the owner of the Stanlow oil refinery that produces 16 per cent of the fuel used on British roads.

2. Senate votes to raise US debt limit until December Democratic and Republican leaders on Capitol Hill have reached an agreement to extend the debt ceiling, providing short-term relief to investors and executives who had fretted about the possibility of a government default this month.

3. Leading apps accused of putting children in danger Dozens of tech companies, including the most popular social media, games and dating apps, are systematically endangering children online and breaching the UK’s new Children’s Code, an investigation has alleged.

4. Ireland signs up to global corporate tax rate Dublin has finally abandoned its 12.5 per cent corporate tax rate and agreed to a minimum 15 per cent rate that will cost the country about €2bn in lost revenues. The move will have impact on 1,556 companies in Ireland employing 500,000 people, among them US tech giants such as Apple, Google, Amazon and Facebook.

5. Saudi-led consortium in £305m Newcastle United takeover A Saudi Arabia-led investment group has completed its acquisition of the English football club, overcoming human rights and piracy concerns to become the latest Middle Eastern owner in the world’s favourite sport.

Newcastle United fans react to the announcement of the takeover outside St James’s Park on Thursday  © Lee Smith/Action Images/Reuters

Coronavirus digest

• The UK has slashed its travel “red list” from 54 to seven destinations from which returning travellers must go into hotel quarantine. The competition regulator has dropped its investigation into British Airways and Ryanair over refunds for passengers prevented from flying during the pandemic.

• Moderna says it plans to spend up to $500m to build a messenger RNA manufacturing plant in Africa to produce its Covid-19 vaccine and other jabs.

• When future historians look back, how will the knock-on, indirect and half-hidden costs of Covid-19 compare with the direct effects of the disease?

• The pandemic has exacerbated the uncertainty around career choices, particularly among young adults.

• A record number of US small businesses say they cannot find enough qualified workers, adding to signs that labour shortages are holding back the recovery.

• Opinion: The recovery may prove more complicated than it looks, writes John Plender. A bad news pileup makes it hard to understand precisely where we are.

Sign up to our Road to Recovery newsletter for regular updates on business and the economy in a world transformed by the pandemic.

The days ahead

Economic data When the US Labor Department releases its monthly report on the jobs market later today, all eyes will be on the headline number of how many positions were created in September. Economists forecast that the non-farm payrolls report will show employers added 500,000 jobs in September. (US News, FT)

IMF meeting France plans to give its backing to Kristalina Georgieva when 24 board members meet to assess whether they should retain the fund’s managing director. The move follows allegations challenging Georgieva’s ethics in her previous job at the World Bank.

Czech Republic parliamentary election A poll suggests that Prime Minister Andrej Babis’s Ano will emerge as the biggest party in the election, which will be held today and tomorrow, with 27 per cent of the vote.

Nobel Peace Prize Norway is expected to announce the winner, followed by a prize for economics on Monday.

What else we’re reading

The hidden costs of cost-benefit analysis Every economist has their own list of pros and cons, although the hope is to be a little more systematic. Tim Harford asks, what is the point if all the costs and benefits being analysed are flights of fantasy?

Return of the renters Tenants in world cities such as London and New York are finding the deluge of discounted properties that hit the market during the first coronavirus lockdowns is fast drying up — and the scramble for rental homes is back.

Catching billionaire lottery fever National lotteries have been around for so long that someone scooping a lot of money against high odds is no longer a novelty. Whether it makes any greater financial sense to buy a ticket is dubious. But record-breaking payouts have been engineered by reducing the chances to near zero. This has not put people off.

The US right’s love affair with Hungary’s leader US conservatives used to admire Viktor Orban from a distance. Now they want to emulate him close-up, writes Edward Luce. The reasons for Orban’s ascent in the eyes of Republicans offer a road map on how the party plans to return to power.

Can the music industry clean up its act? For decades, a culture of sexual abuse in the industry has been ignored. Helen Brown asks whether the conviction of R Kelly, who was found guilty of using his superstar status to sexually abuse women and children, was a turning point.

Music

The Beatles and why we won’t let it be When the group split up in the spring of 1970 — with all of them still in their 20s — the world reacted in improbable shock, writes Peter Aspden. It was partly a collective sense of denial over the turn of a momentous decade, and also went against the idea that the group had become somehow glued together.

Was the end really that bitter? © Ethan A Russell/Apple Corps Ltd

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