© Financial Times

This is an audio transcript of the FT News Briefing podcast episode: The Bank of England’s surprise rate rise

Marc Filippino
Good morning from the Financial Times. Today is Friday, December 17th, and this is your FT News Briefing.

[MUSIC PLAYING] 

Marc Filippino
Coronavirus cases are surging as the holidays approach, but many Americans can’t find booster shots. And one of the largest private equity groups in the US is finally going public. Plus, the Bank of England surprised pretty much everyone yesterday when it raised interest rates.

Katie Martin
And I think it just tells us that if you think you know what the Bank of England is going to do next, you’re probably wrong.

Marc Filippino
The FT’s Katie Martin breaks down a wild week in central bank land. I’m Marc Filippino, and here’s the news you need to start your day.

[MUSIC PLAYING] 

Marc Filippino
Travel bans, postponed sports matches and surging Covid cases are all happening again, this time because of the Omicron variant of coronavirus. Yesterday, France said it’ll ban UK tourists from coming over in an attempt to stop the spread. In sports, the Premier League said it will postpone several soccer matches this weekend, and in the US, the NBA upped their Covid protocols for basketball players who aren’t boosted. The Biden administration is urging Americans to get the booster shot. The FT’s Kiran Stacey says easier said than done.

Kiran Stacey
The problem is that that message is really tailored to people who might be thinking about getting boosters but are not sure. What they’ve not really tackled is what about people who want to get boosters and are having to wait for a long time to get them? It’s not that these doses are not available. You can get appointments at CVS, Walgreens, wherever, but you may have to wait for two weeks. The problem is that in those two weeks, Omicron is gonna hit big time. We’re already at a situation in New York, New Jersey, where Omicron accounts for 13 per cent of cases. That is going to rise exponentially over the next few days, let alone the next two weeks. So I think really, I haven’t heard much from the administration on what they’re doing to improve capacity where demand is already high. But I think that that is gonna be one of the challenges they have to tackle and they have to tackle soon because we’re about to get deluged.

Marc Filippino
So Kiran, is this a supply problem?

Kiran Stacey
Well, it doesn’t seem that doses are the problem in themselves. Certainly, in most areas of the country, doses are in plentiful supply. It seems that it’s just that the pharmacies are overburdened. Now lots of people are experiencing things like that. Most pharmacies only have one person administering doses, usually sat in a corner of the pharmacy with a long line of people in front of them. But I would say it varies hugely place to place. So if I want to get a vaccine shot of any type in, say, rural Mississippi or Texas or Alabama, I can easily. I just woke up, there are appointments all the time, but I want to do the same in DC. I’m looking at a wait of 10 days. New York, it’s more like two weeks. So it’s a very different picture, depending on where you are in the country.

Marc Filippino
Kiran Stacey is the FT’s Washington correspondent.

[MUSIC PLAYING] 

Marc Filippino
One of the last private equity giants is leaping into the public markets. TPG has filed to go public and joins other buyout firms like KKR and Blackstone, both capitalised on soaring stock valuations when they listed their shares on the stock market. TPG is based in Texas and has more than $100bn in assets under management. An IPO is part of a succession plan. The idea is to take TPG from being a privately held partnership to a fully independent public corporation within five years of the listing.

[MUSIC PLAYING] 

Marc Filippino
Britain’s central bank surprised the markets this week by raising interest rates for the first time in three years. The Bank of England did this despite the economic concerns over the Omicron variant, which has absolutely engulfed the UK. To talk about the BoE’s latest monetary move, I’m joined by our markets editor Katie Martin. Hey, Katie.

Katie Martin
Hey, how are you doing?

Marc Filippino
I’m a little confused, to be honest with you. You know, the Bank of England surprised a bunch of people with the rate hike yesterday. Why did it do that?

Katie Martin
(Laughs) Good question. (laughs)

Marc Filippino
Thank you. (laughs)

Katie Martin
So yeah, this very much goes against the kind of golden rule of central banking, right? Which is it’s kind of fair game to surprise the markets with generosity to cut rates or launch asset purchase programmes when the going gets tough. They don’t normally like to drop hawkish surprises, so central banks generally try and avoid throwing rate rises or shutting down asset purchase programmes when the market isn’t expecting it. But that’s nonetheless what the Bank of England did. So despite this new wave of pandemic that we have absolutely ripping through the UK at the moment with the Omicron variant, they went right ahead and raised rates. But especially given the news that we’ve had this week on the pandemic front, people thought there’s no way they’re gonnna raise rates into this sort of environment and surprise surprise, they did. So they raised rates from 0.1 per cent to 0.25 per cent. It’s not a huge amount in and of itself. Not really, but it’s, you know, it’s a signal. It’s important, it matters.

Marc Filippino
Why did the Bank of England do this?

Katie Martin
Because you just look at what’s happening with inflation, it’s so far ahead of target. They, you know, this is what they’re there to do, is to control inflation and by extension, really inflation expectations, and it’s just running away. And so they felt like they had to do something. And this is a thing. You know, there was one member of the rate setting committee, of which there are nine people, who said basically, let’s wait and see until February. We can see how Omicron pans out. We can see whether inflation comes off the boil. But everyone else on the committee voted to raise rates. So you know, they’re serious about this and sterling popped higher, bonds fell in price. And I think it just tells us that if you think you know what the Bank of England is going to do next, you’re probably wrong.

Marc Filippino
Now on the very same day, the ECB came out and said that it was going to start ending its pandemic bond-buying programme, the PEPP, and European stocks loved it. You know, why was there such a reaction there?

Katie Martin
So this this has been a truly vintage day for central banks (laughter) everywhere. For what it’s worth, Norway raised its benchmark interest rates by a quarter of a percentage point. The Swiss left interest rates on hold. Turkey did its thing. It cut policy by a full policy rate by a full percentage point because it’s Turkey. European Central Bank, yes, they also said that they would scale back the stimulus. They’re going to end purchases in the pandemic programme in March. But here’s the thing: they’ve given themselves a get-out-of-jail card because they’re still going to use a separate scheme to keep on buying bonds for most of next year. So they’ve given themselves flexibility. They’ve done what one analyst described to us as a “cautious taper”. This is very ECB, you know, make sure you know where your nearest exit is. Make sure you can always reverse course. So yes, this is a kind of hawkish-ish signal, but they’ve got (inaudible) manoeuvre.

Marc Filippino
Katie Martin is the FT’s markets editor. Thank you, Katie.

Katie Martin
My pleasure.

[MUSIC PLAYING] 

Marc Filippino
And before we go, we already told you that sports teams are bracing for Omicron, and teams in Europe are ramping up a Covid stimulus plan for their beleaguered soccer clubs. Uefa, which governs the Champions League, is planning a €7bn pandemic package. It just tapped Citigroup to lead the financing. Clubs across Europe have lost billions of euros in revenues since the pandemic began. Matches were postponed and even when they were rescheduled, they were behind closed doors, which meant less ticket revenues. The finance package involves debt that will be secured against the governing body’s broadcasting rights.

[MUSIC PLAYING] 

Marc Filippino
You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Fiona Symon and me, Marc Filippino. Our editor is Jess Smith. We had help this week from Peter Barber, Gavin Kallmann and Michael Bruning. We’d like to welcome our new executive producer, Topher Forhecz. Cheryl Brumley is the FT’s global head of audio, and our theme song is by Metaphor Music.

This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.

Copyright The Financial Times Limited 2022. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article

Comments