Interest Rates will not rise as much original forecast (Bank of England)
The Bank of England has signalled that borrowing costs will not rise as much as markets expect in the future, even as it imposed the biggest rate rise for three decades to combat soaring inflation.
Yesterday’s BoE’s 0.75 percentage point increase to 3% took interest rates to their highest point since 2008. But the central bank issued unusually strong guidance that rates would not need to rise much further to bring inflation back to its 2% target, partly because it forecast a prolonged recession ahead.
“We can make no promises about future interest rates,” said BoE governor Andrew Bailey. “But based on where we stand today, we think [rates] will have to go up by less than currently priced into financial markets. That is important because, for instance, it means that the rates on new fixed-term mortgages should not need to rise as they have done.”
The pound fell almost 2% against the dollar, which had been buoyed by a contrasting message from the Federal Reserve that US interest rates would increase by more than Wall Street anticipates.
The BoE’s 0.75 percentage point rise, the highest for 30 years, followed identical increases by the Fed on Wednesday and the European Central Bank last week as monetary authorities worldwide sought to contend with rising inflation, which has reached a 40-year high in the UK of 10.1%.
Seven of the nine Monetary Policy Committee members voted for the rise, maintaining that “a larger increase” this month “would help to bring inflation back to the 2% target sustainably in the medium term, and to reduce the risks of a more extended and costly tightening later”.
But guidance and economic forecasts published by the BoE suggested it was taking a more dovish stance on interest rates than the Fed. Jay Powell, the US central bank chair, this week labelled talk of pausing interest rate rises as “very premature”.
The BoE projected that if it increased interest rates to 5.25%, Britain would be plunged into the longest recession since the second world war — eight quarters of contraction — and inflation would fall to zero in three years’ time.
But, in a strong signal that it believed it may have already done the bulk of the work needed to curb inflation, the central bank highlighted an alternative in which rates do not rise any further from the current 3%.
In this scenario, inflation was projected to peak at 10.9 per cent in the fourth quarter of 2022 before falling to 5.6% at the end of 2023, 2.2% at the end of 2024 and below its 2% target in 2025. Even if interest rates stay on hold at 3%, the BoE still forecasts a recession for five quarters, based on higher energy prices and mortgage costs.
Jersey’s new-hospital plans to be scrapped and replaced with ‘hybrid’ model
Jersey’s long-running future-hospital saga took a new twist this week after the government officially announced it was abandoning plans for a single-site facility at Overdale.
It is now pursuing a hybrid General Hospital spread across the existing Gloucester Street site, adjacent land at Kensington Place, and Overdale.
Announcing the outcome of a review of the Our Hospital project, Infrastructure Minister Tom Binet said the proposal to abandon plans for a single-site Hospital at Overdale was based on the new hybrid scheme being more appropriate and affordable.
The publication of the review is the latest chapter in a long-running saga which has already lasted more than a decade, with an estimated £120 million spent so far.
Although no headline figure has been provided for the total cost of the new proposal, Deputy Binet estimated that the smaller scale could achieve a potential saving of around £50m from the previous scheme – which had been costed at £804m.
A phased approach to construction has been outlined; Deputy Binet said that subject to funding, planning permission and ‘favourable tendering conditions’, work at Overdale could begin by November 2024 and be completed within three years.
The Kensington Place phase of work would start by November 2025, and be completed by November 2028, the review added, with the final phase then beginning at Gloucester Street and being complete by the end of 2030 – four years after the stated completion date for the single-site Overdale project.
Deputy Binet said that moves to establish a mental health facility would proceed separately and that he hoped work to construct this facility could commence within three years and be complete by the end of 2027.
The review acknowledges that the longer time span for the project would necessitate additional investment in maintaining the existing General Hospital, which has long been recognised as inadequate. Over the next ‘three to six months’ – a period running until the end of April – Deputy Binet outlined a series of next steps.
These include further consultation with stakeholders, the establishment of a political oversight group, feasibility studies, the identification of a funding model and a proposition to the States Assembly for the new hybrid model.
Two men rescued after light aircraft ditches into sea off Jersey praise ‘exceptional’ emergency services response
Two men rescued after the light aircraft they were in ditched in the sea off Jersey’s south-east coast have praised the response of emergency services.
Duncan Laisney and Paul Clifford were picked up by the St Helier inshore lifeboat and taken back to Albert Pier on Thursday afternoon, after being picked up from a life raft in rough seas.
All three RNLI lifeboats, Ports of Jersey’s pilot boat ‘Rival’, Channel Islands Air Search and a French rescue helicopter went to the scene to take part in the search, which was coordinated by Jersey Coastguard.
Mr Laisney said the hour-long wait ‘felt like a long time’ but praised the professionalism of emergency personnel. Emergency services were called out just after 2pm when the pilot radioed Air Traffic Control to say they were ditching.
Mr Clifford said: ‘We’re delighted to be back, it was a little bit worrying, but we knew people were coming to get us.
‘It was a nice feeling to see the lifeboat coming towards us – there was a great sense of relief.’
The men were uninjured and did not require hospital treatment.
Minister hopes French will be able to use ID cards to enter Jersey
Allowing French visitors to use identity cards to travel to the Channel Islands could help revitalise the tourism industry post-Brexit, according to the External Relations Minister.
Deputy Philip Ozouf said that the number of visitors from the country had dropped off a ‘cliff edge’ and confirmed that discussions were taking place between Jersey and France to address this.
The reintroduction of passport requirements after the UK’s withdrawal from the EU had become a big issue for the Island, as only about 50% of French nationals have passports.
Previously they could enter Jersey using an ID card. Senator Ozouf discussed the issue while addressing the House of Commons European Scrutiny Committee, and revealed that negotiations to address the problem were taking place with Norman authorities.
“Prior to the change, we would have accepted identity cards. We are part of the Common Travel Area. We respect UK borders,” he said. “We are very effective in relation to border control. However, the practical issue is that we have seen a cliff edge in French visitors coming to Jersey and vice versa.”
“This is an issue that we have raised with French interlocutors, and we want to continue to have a dialogue on this issue because it has had a big impact on us. It does not serve either the communities of our regional counterparts or ourselves to see a continuation of what is quite a difficult situation, frankly.”
“This has arisen because of passports. Not every French person has a passport. Not everybody who visits Brittany and Normandy and wants to hop on a boat to come across to their friendly Channel Islands, or Îles de la Manche, can do so because they have not got a passport. [Accepting] identity cards would help solve that, and we are in discussions about that,” he added.
The news has been welcomed by John Napton, Chief Executive of Condor Ferries, who said that the company had raised similar concerns more than two years ago.
“The numbers of French and other continental passengers travelling here has been significantly affected by the passport issue. Over 50% of French nationals do not own a passport and it takes many months and 86 euros each to get one.”
“Despite this backdrop, which won’t solve itself overnight, we plan next year to increase the frequency and promote the islands in France to try to stimulate interest. This is one reason that we have brought back the Sunday evening St Malo-Jersey sailings next summer and put on additional day trips over the season,” he added.
Robert Mackenzie, Director of CI Travel Group and Chair of the Jersey Chamber of Commerce Tourism, Venues and Attractions Group, said that day-trip visitors this year were down around 77% against pre-Covid levels.
“Clearly the day-trip market has taken a significant hit, which reflects the fact that a lot of French people either don’t have passports or decide to go on a day trip if they are spending time in Brittany or Normandy and don’t necessarily have it with them. Anything that allows French visitors to come here more easily is a good thing.”
Jersey records its joint-warmest October as year of extreme weather continues
Jersey’s exceptional weather continued last month when the Island recorded its joint-warmest October – following a year of records which experts say paint a picture of escalating climate change.
Last month, temperatures averaged 15.7°C – 2°C above average and equal to the exceptionally warm Octobers of 2006 and 2014. The hot month – which was also drier and sunnier than average – came as the first ten months of the year saw a series of new records and weather so dry that Jersey Water imposed a hosepipe ban for the first time since 2003.
Figures released to the JEP by Jersey Met show that so far in 2022:
- Every month except June has had below-average rainfall
- The Island recorded its warmest-ever summer with an average temperature of 19.6°C – narrowly beating the famously hot summer of 1976
- Jersey smashed its all-time temperature record, with 37.9°C being registered on 18 July
- It then sweltered on its hottest-ever night, when the temperature did not drop below 25.5°C
- And saw a record four so-called tropical nights (where the temperature remains over 20°C) – more than any other year, as well as the latest tropical night, on 13 September
- The Island also had a record number of days (eight) when the mercury topped 30°C
- And for the first time ever, the sea temperature has remained above the long-term average every day of the year so far
Paul Aked, head of meteorology at Jersey Met, said: “Each of these events in isolation are just natural variations in weather. However, when you start to bring them together and look at them as a whole, they show a picture of our climate and what we can expect moving into the future.”
European markets are sharply higher today with shares in France leading the region. The CAC 40 is up 2.27% while Germany’s DAX is up 1.72% and London’s FTSE 100 is up 1.49%.
The Dow Jones Industrial Average slid 146.51 points, or 0.46%, to close at 32,001.25 last night. The S&P 500 lost 1.06% to finish at 3,719.89, while the Nasdaq Composite shed 1.73% to settle at 10,342.94.
Asian markets finished mixed as of the most recent closing prices. The Hang Seng gained 5.36% and the Shanghai Composite rose 2.43%. The Nikkei 225 lost 1.68%.