The Bank of England maintained its stimulus package and held interest rates at 0.1 per cent on Thursday but signalled that “modest tightening” would be needed as inflation ramps up.
The central bank kept the size of its bond-buying programme unchanged at £895 billion ($1.2 trillion) and the monetary policy committee voted unanimously to hold the benchmark lending rate at a record low of 0.1 per cent, 16 months after the lender first made the interest rate cut.
However, with the lender expecting inflation to surge to 4 per cent by the end of this year, MPC official said some adjustment would be required in due course to keep price growth under control.
“The economy is projected to experience a more pronounced period of above-target inflation in the near term than expected in the May Report,” the BoE said in a statement.
“Some modest tightening of monetary policy over the forecast period is likely to be necessary.”
Britain's economy has rebounded quickly since restrictions were first eased in March after suffering its biggest fall in output in more than 300 years last year.
While the BoE reaffirmed its expectation that the economy will rebound by 7.25 per cent this year, the recovery slowed sharply in July to its weakest level since March as supply-chain bottlenecks and rising worker absences caused by Covid-19 isolation rules hampered business activity.
However, inflation was enough of an issue for the MPC's Michael Saunders to vote for stimulus to wind down as soon as possible, with the committee member in favour of ending the BoE’s net asset purchases £45bn short of the £895bn target.
His stance was overruled by the rest of the eight-member MPC, who said higher inflation will be mostly transitory, though they flagged the need to take their foot off the stimulus pedal to meet their 2 per cent inflation target “in the medium term.”
“We expect above-target inflation to be temporary. We don’t think that demand will continue to rise as fast, and some of the shortages that are currently making it difficult for businesses to produce their products should ease,” the BoE said.
“We expect inflation to fall back, reaching our target in around two years’ time.”
Britain’s inflation rate hit 2.5 per cent in June - the highest rate in almost three years - as Covid restrictions were eased further, however the BoE insisted it would not tighten monetary policy until spare capacity is eliminated and the bank’s inflation target is met sustainably.
The Bank also suggested that it now intends to reduce the stock of purchased assets by ceasing to reinvest maturing assets when Bank Rate has risen to 0.5 per cent instead of the previous target of 1.5 per cent.
“By talking about the mechanics of tightening policy, that is another signal that tightening is drawing nearer,” said Ruth Gregory, senior UK economist at Capital Economics.
“While the MPC’s policy statement sent a signal that higher interest rates are on the horizon, we still think it’s more likely that the MPC continues to sit tight until the middle of 2023 before tightening policy.”
The central bank said it would also be paying close attention to the labour market with expectations that unemployment will drop to 4.25 per cent in the fourth quarter of next year.
While the Bank noted that the stock of vacancies has increased along with difficulties in matching available jobs and workers, it recognised there was uncertainty about how the economy will adjust to the end of the furlough scheme later in the year.
Ed Monk, associate director of personal investing at Fidelity International, said the labour market remains key with recent wage rise and unemployment data turning out stronger than expected.
“That points to a broad-based rise in demand that may not recede as the economy recovers from the pandemic,” he said.
The FTSE 100 responded to the Bank of England report by dropping 0.2 per cent over concerns about the inflation spike.
Meanwhile, the pound was up 0.21 per cent to $1.3918 at 12.55pm London time.
“Sterling has experienced massive volatility on the back of the BOE’s meeting even though nothing was changed,” said Naeem Aslam, chief market analyst at Avatrade.
“However, the message isn’t fully digested in the market, and this is bringing significant whipsaw move for the currency. The bank has made it clear that the case of negative interest rates are still on the table but if we look at the sterling’s price action, traders aren’t buying that stance.”
How it works
A $10 hand-powered LED light and battery bank
Device is operated by hand cranking it at any time during the day or night
The charge is stored inside a battery
The ratio is that for every minute you crank, it provides 10 minutes light on the brightest mode
A full hand wound charge is of 16.5minutes
This gives 1.1 hours of light on high mode or 2.5 hours of light on low mode
When more light is needed, it can be recharged by winding again
The larger version costs between $18-20 and generates more than 15 hours of light with a 45-minute charge
No limit on how many times you can charge
UAE currency: the story behind the money in your pockets
The specs
Engine: 3.6 V6
Transmission: 8-speed auto
Power: 295bhp
Torque: 353Nm
Price: Dh155,000
On sale: now
Milestones on the road to union
1970
October 26: Bahrain withdraws from a proposal to create a federation of nine with the seven Trucial States and Qatar.
December: Ahmed Al Suwaidi visits New York to discuss potential UN membership.
1971
March 1: Alex Douglas Hume, Conservative foreign secretary confirms that Britain will leave the Gulf and “strongly supports” the creation of a Union of Arab Emirates.
July 12: Historic meeting at which Sheikh Zayed and Sheikh Rashid make a binding agreement to create what will become the UAE.
July 18: It is announced that the UAE will be formed from six emirates, with a proposed constitution signed. RAK is not yet part of the agreement.
August 6: The fifth anniversary of Sheikh Zayed becoming Ruler of Abu Dhabi, with official celebrations deferred until later in the year.
August 15: Bahrain becomes independent.
September 3: Qatar becomes independent.
November 23-25: Meeting with Sheikh Zayed and Sheikh Rashid and senior British officials to fix December 2 as date of creation of the UAE.
November 29: At 5.30pm Iranian forces seize the Greater and Lesser Tunbs by force.
November 30: Despite a power sharing agreement, Tehran takes full control of Abu Musa.
November 31: UK officials visit all six participating Emirates to formally end the Trucial States treaties
December 2: 11am, Dubai. New Supreme Council formally elects Sheikh Zayed as President. Treaty of Friendship signed with the UK. 11.30am. Flag raising ceremony at Union House and Al Manhal Palace in Abu Dhabi witnessed by Sheikh Khalifa, then Crown Prince of Abu Dhabi.
December 6: Arab League formally admits the UAE. The first British Ambassador presents his credentials to Sheikh Zayed.
December 9: UAE joins the United Nations.
FIGHT CARD
Fights start from 6pm Friday, January 31
Catchweight 82kg
Piotr Kuberski (POL) v Ahmed Saeb (IRQ)
Women’s bantamweight
Cornelia Holm (SWE) v Corinne Laframboise (CAN)
Welterweight
Omar Hussein (JOR) v Vitalii Stoian (UKR)
Welterweight
Josh Togo (LEB) v Ali Dyusenov (UZB)
Flyweight
Isaac Pimentel (BRA) v Delfin Nawen (PHI)
Catchweight 80kg
Seb Eubank (GBR) v Mohamed El Mokadem (EGY)
Lightweight
Mohammad Yahya (UAE) v Ramadan Noaman (EGY)
Lightweight
Alan Omer (GER) v Reydon Romero (PHI)
Welterweight
Ahmed Labban (LEB) v Juho Valamaa (FIN)
Featherweight
Elias Boudegzdame (ALG) v Austin Arnett (USA)
Super heavyweight
Roman Wehbe (LEB) v Maciej Sosnowski (POL)
Killing of Qassem Suleimani
Where to buy
Limited-edition art prints of The Sofa Series: Sultani can be acquired from Reem El Mutwalli at www.reemelmutwalli.com
What the law says
Micro-retirement is not a recognised concept or employment status under Federal Decree Law No. 33 of 2021 on the Regulation of Labour Relations (as amended) (UAE Labour Law). As such, it reflects a voluntary work-life balance practice, rather than a recognised legal employment category, according to Dilini Loku, senior associate for law firm Gateley Middle East.
“Some companies may offer formal sabbatical policies or career break programmes; however, beyond such arrangements, there is no automatic right or statutory entitlement to extended breaks,” she explains.
“Any leave taken beyond statutory entitlements, such as annual leave, is typically regarded as unpaid leave in accordance with Article 33 of the UAE Labour Law. While employees may legally take unpaid leave, such requests are subject to the employer’s discretion and require approval.”
If an employee resigns to pursue micro-retirement, the employment contract is terminated, and the employer is under no legal obligation to rehire the employee in the future unless specific contractual agreements are in place (such as return-to-work arrangements), which are generally uncommon, Ms Loku adds.
Student Of The Year 2
Director: Punit Malhotra
Stars: Tiger Shroff, Tara Sutaria, Ananya Pandey, Aditya Seal
1.5 stars
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MATCH INFO
Uefa Champions League quarter-final second leg:
Juventus 1 Ajax 2
Ajax advance 3-2 on aggregate
The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.
WHAT IS A BLACK HOLE?
1. Black holes are objects whose gravity is so strong not even light can escape their pull
2. They can be created when massive stars collapse under their own weight
3. Large black holes can also be formed when smaller ones collide and merge
4. The biggest black holes lurk at the centre of many galaxies, including our own
5. Astronomers believe that when the universe was very young, black holes affected how galaxies formed
What are the influencer academy modules?
- Mastery of audio-visual content creation.
- Cinematography, shots and movement.
- All aspects of post-production.
- Emerging technologies and VFX with AI and CGI.
- Understanding of marketing objectives and audience engagement.
- Tourism industry knowledge.
- Professional ethics.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
KILLING OF QASSEM SULEIMANI
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Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
