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On the heels of two momentous events (and I’m not talking about Halloween and Guy Fawkes), little attention is being paid to interest rates.
Regardless of what happened in the first Labor budget and the US presidential election, tomorrow will be an important day for all borrowers.
Both the Bank of England and the US Federal Reserve are likely to reduce official interest rates.
The US central bank has delayed a day to avoid clashing with the US vote. It is expected to reduce the federal funds rate by a quarter percentage point from its current range of 4.75 percent to 5 percent.
Prediction: Both the Bank of England and the US Federal Reserve are likely to cut official interest rates
It was expected to be back in operation in December. But even an independent central bank with a mandate to combat unemployment and inflation will want to see where the political and economic terrain stands before taking the next step.
The Federal Reserve will want to avoid a further cooling of the US labor market. He will also be concerned about the strength of the US economy in the third quarter and its impact on prices.
The known unknowns could dampen hopes of a new cut in December amid uncertainty over the future scale of fiscal expansion.
Similarly, the Bank of England is seen as set to cut rates this week, having avoided a 5 per cent cut last month.
There is speculation of a 7 to 1 vote in favor of a cut, with only hardliner Catherine Mann resisting. British monetary policy is not in line with that of other G7 central banks.
The big question for the Bank’s interest rate setters is whether the significant easing of the fiscal stance in Rachel Reeves’ Budget will mean that normalization of rates in the UK will have to wait, even as retail price inflation consumer is below 2 percent.
The Office of Budget Responsibility forecasts cost-of-living increases above target.
The priority should be driving growth by making life easier for consumer, mortgage and business borrowers. But the Monetary Policy Committee that sets interest rates is not known for its bold measures.
chinese syndrome
AstraZeneca CEO Pascal Soriot has bet heavily on China. It is among the UK pharmaceutical giant’s largest and fastest-growing territories and accounts for around 13 per cent or £4.5bn of its global sales.
Soriot, who has a home in Sydney, has taken a special interest in bringing AZ’s suite of anti-cancer compounds to the People’s Republic.
He has often claimed that, unlike British competitor GSK, which ran into difficulties a decade ago, AZ has nothing to fear from Beijing.
Investors are starting to question that. Reports from a Chinese news source, Yicai, suggest that dozens of AZ executives are under investigation for alleged insurance fraud following an announced investigation into the company’s China president, Leon Wang.
Shares plunged 8.4 per cent, making it a difficult year for what was the UK’s largest company. It has lost 5 percent of its value this year.
There is little transparency about corporate misconduct in China, so it is impossible to know how serious the current regulatory scrutiny will prove.
What we do know is that breaches with Beijing authorities can be very damaging and take time to heal.
Correct ingredients
Few UK companies champion family control better than Associated British Foods. The latest results show the benefits of long-term investment and modernization.
Food companies show the benefits that come from innovation and greater automation at Twinings, Patak’s and across the piece.
Overall profits rose 43 per cent, to just under the £2bn mark.
In a period of stress for the market – under pressure from the minimum wage, national insurance increases and unfair trading rates – Primark continues to prosper.
There are around 70 store openings in the pipeline and “click and collect” is a big plus. Expansion into the often complicated US market is a feature of opening a store in the US-Mexico border area.
Closer to home, chief executive George Weston, who sources food from his UK farms, is concerned about mixed signals from Whitehall about the push for domestic production against a more sustainable agenda.
He is also unimpressed by the change in IHT for landowners. Early days of the Labor Party, but hopefully someone is listening.
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