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The Guardian - UK
The Guardian - UK
Business
Graeme Wearden

UK on track to be worst-performing G7 economy this year, says IMF – as it happened

International Monetary Fund Interest Rates Bitcoin David Malpass United States China Inflation Lawrence Summers the World Bank World Bank
Shops in Manchester.
Shops in Manchester. Photograph: Gary Calton/The Observer

Closing summary

Time for a recap.

The UK economy is expected to shrink this year and will be at the back of the leading G7 countries during 2023, the International Monetary Fund has warned.

The IMF has lifted its forecast for the UK’s economy this year – it is now expected to shrink by 0.3%, not the 0.6% fall in GDP previously expected.

That would leave the UK lagging behind other advanced economies this year.

IMF chief economist Pierre-Olivier Gourinchas told reporters in Washington DC that UK growth this year has been stronger than than expected, but that the UK was vulnerable to a trade shock from high imported energy costs.

The tight labour market has also led to higher interest rates to fight inflation, Gourinchas told reporters in Washington DC.

The IMF also warned that the global economy could suffer a “hard landing” if persistently troublesome inflation forces interest rates to stay higher for longer.

But it has also predicted interest rates will fall back towards pre-pandemic levels, due to weak productivity and aging populations.

Tony Danker, the head of the Confederation of British Industry, says he was shocked to be dismissed today following an investigation into complaints about his conduct in the workplace.

Danker added that he was “truly sorry” for making colleagues “feel uncomfortable”.

He’s being replaced by former CBI chief economist Rain Newton-Smith.

The business lobby group said it wanted to make clear that Danker was not the subject of other complaints recently reported by the Guardian. Those other claims by more than a dozen women allege various forms of sexual misconduct by senior figures at the organisation.

City of London Police say they have begun an investigation into alleged sexual misconduct at the CBI, in the wake of the Guardian’s coverage of allegations at the business organisation.

European stock markets have risen today, with the FTSE 100 index jumping almost 0.6% as traders returned after the Easter break.

The blue-chip index has just closed at a one-month high of 7785 points.

Bitcoin hit its highest level since last June, climbing over $30,000, as crypto emerged from its recent slump.

In other news…

Economist Megan Greene is to join the Bank of England’s monetary policy committee this summer, replacing Silvana Tenreyro when her term ends in July.

More than 150 pubs closed for good in England and Wales during the first three months of this year as soaring energy bills and other costs pushed many operators over the edge.

UK consumers cut back on groceries, clothes shopping and eating out last month but streaming and pay TV subscriptions jumped as cash-conscious viewers switched to nights in.

Shareholders in Cineworld will be wiped out under the embattled cinema operator’s latest proposals to reorganise the business and exit bankruptcy.

The world’s deepest offshore wind turbine has been installed almost 17 miles off the coast of Angus as part of Scotland’s biggest offshore windfarm.

Tupperware, the 77-year-old company famed for its airtight food containers, has warned it could go bust if it cannot raise emergency funds to stay afloat.

Updated

IMF growth forecasts: What the experts say

Innes McFee, chief global economist at Oxford Economist, fears that the IMF’s new growth forecasts are too optimistic.

The IMF forecasts that world growth will drop to 2.8% this year, from 3.4% in 2022, before rising to 3% in 2024.

McFee says the new projections underestimate the impact of tighter financial conditions on advanced economies, saying:

The IMF’s forecast still looks too optimistic over the next 2 years in our view. The impact of bank funding turmoil looks to have been offset in their forecasts by the positive developments in European energy markets, solid economic momentum and China’s earlier than expected reopening, to leave the IMF’s global GDP projection broadly unchanged.

But we think their forecasts underestimate the impact that tightening in financial conditions will have on advanced economies in second half of this year and next. Our latest global forecast – to be published tomorrow – is more downbeat this year and next. We expect growth in PPP terms of 2.3% this year and 2.8% next, which is weak by historical standards. This equates to 1.9% and 2.2% respectively on a constant exchange rates basis – our preferred measure of global activity.

A key difference in our thinking seems to be that we expect more of an economic impact from tighter financial conditions in advanced economies than the IMF. Consequently, our 2024 forecasts for GDP growth in the US, Canada and the eurozone are more cautious.

With the fallout from bank funding turmoil still to be fully realised, we maintain the view that there are substantial downside risks to our forecast. The IMF appears to agree, assigning a 25% probability that global growth will fall below 2% in 2023.

Ryan Myerberg, portfolio manager and co-head of global taxable fixed income at Brown Advisory, agrees that higher borrowing costs are hitting the world economy, and worrying investors:

“We agree with the IMF when it says that the recalibration of growth is lower as tighter monetary policy continues to bite.

We have long been pounding the table over the impact that the last 12 plus months of hikes will have on interest rate-sensitive parts of the global economy and its role in creating an environment of nervous investors, which means every wobble and crack that appears will be magnified. This is especially true as liquidity conditions in all asset classes continues to get worse.”

City of London Police has launched an investigation into alleged sexual misconduct at the Confederation of British Business (CBI) in the wake of the Guardian’s coverage of allegations at the business organisation, my colleague Ben Quinn reports.

The force told the Guardian that it had approached the CBI following media reports, and that its investigation was at a very early stage.

The Guardian reported last week that more than a dozen women claimed to have been victims of various forms of sexual misconduct by senior figures at the CBI, including one who alleges she was raped at a staff party on a boat on the River Thames.

The, which is responsible for law enforcement within the City of London, including the Middle and Inner Temples, released a statement after it was approached by the Guardian on Tuesday.

A spokesperson said:

“The City of London Police takes all acts of sexual misconduct and violence against women and girls extremely seriously.”

“We approached the CBI following media reports and our investigations are at a very early stage. It would not be appropriate to comment any further at this time.”

Megan Greene to join Bank of England's monetary policy committee

Chancellor Jeremy Hunt has appointed Megan Greene, the global chief economist at Kroll, to the Bank of England’s Monetary Policy Committee.

Greene will replace professor Silvana Tenreyro, one of the most dovish members of the MPC, when her term ends in July.

Hunt says:

Megan Greene’s wide experience across financial markets and the real economy will bring valuable new expertise to the MPC. I am delighted to appoint her to this role and look forward to seeing her contribution to policymaking in the coming years.

I would also like to thank Professor Silvana Tenreyro for all her work since she joined the Bank of England, and wish her the best in the next stage of her career.

Greene is also Senior Fellow at the Watson Institute for International and Public Affairs. She has previously worked as a senior fellow at Harvard Kennedy School, and as global chief economist at John Hancock/Manulife Asset Management. She was also director of European Economics at Roubini Global Economics in 2011 and 2022, when she helped us cover the eurozone crisis.

Greene will join the Bank of England at a time when the central bank may have lifted interest rates to their peak in the current cycle (depending if inflation falls as expected, or not).

Reuters’ Andy Bruce has flagged some of her recent views on the UK economy:

IMF chief economist Pierre-Olivier Gourinchas also points out that higher corporate prices, rather than rising wages, are playing a substantial role pushing up inflation.

Gourinchas says the ‘natural response’ of the economic system is for prices to rise when there is increased demand for goods and services.

Wages tent to take some time to adjust, he points out, as they are adjusted less frequently.

Updated

Pierre-Olivier Gourinchas, the International Monetary Fund’s chief economist, has told reporters in Washington that “forceful action” by the Bank of England calmed the markets “very quickly” after the turmoil in the government bond market last autumn.

Gourinchas says the “brief instability” in the gilts market (after the mini-budget) was an example of rapid rises in interest rates creating pockets of vulnerability in the financial sector.

It prompted the Bank of England to pledge to buy up to £65bn of gilts to calm the markets, and avoid pension funds blowing up.

On the upward revision to the UK’s growth forecast, to a -0.3% contraction this year, Gourinchas explains that growth this year has been stronger than than expected.

We are seeing a little bit of a better performance for the UK economy. There is slightly less fiscal contraction in the pipeline.

So why is the UK performing worse than other G7 members?

Gourinchas says there is a higher dependence on imported energy, creating a trade shock, while the tight labour market has led to higher interest rates to fight inflation.

Gourinchas also told the news conference today that central bank financial stability actions should not take precedence over moves to calm inflation -- unless a severe financial crisis occurs.

Gourinchas explained that there could be situations where near-term stability risks could take precedence, such as a crisis that moves beyond the severe adverse “risk-off” scenario in the IMF’s World Economic Outlook.

He explained:

“It doesn’t mean that you would abandon any nominal anchor but it means that in the near term, you would have to put financial stability first.

Abrdn: UK facing recession-like conditions

The IMF’s forecasts once again make for “grim reading” in their assessment of the UK economy and the global economy more generally, warns Luke Bartholomew, senior economist at asset management firm abrdn.

Bartholomew thinks the IMF is on the right lines with its assessment of the UK, but too optimistic about the US economy:

“Precise growth forecasts are notoriously difficult to get right, and no doubt the IMF will be wrong in the specifics of their numerical forecasts. But we agree with the broad message of the forecasts that the UK economy is likely to endure recession-like conditions for much of this year.

“We don’t think the IMF is pessimistic enough on US growth as we expect ongoing credit condition tightening to tip the US economy into recession later this year, with large spillovers to the rest of the world.

Bartholomew adds that the most interesting aspect of the IMF’s analysis could be its prediction that interest rates will fall back towards their pre-pandemic levels (as covered earlier this morning):

“Over the long run, interest rates are pinned down by slow moving forces like demographics and inequality, and the IMF sees little reason to think these have been fundamentally changed since the pandemic.

If the IMF is right about this, and we are right about a recession, the debate will move to how much central banks are likely to cut interest rates in the coming years.

Investors may find this period of high interest rates was simply a brief interruption of the low-rate world they have been dealing with since the global financial crisis.”

Britain’s economy is being held back by the ‘botched’ Brexit deal agreed by the government says Layla Moran, Lib Dem MP and member of the UK Trade and Business Commission.

Commenting on today’s IMF forecasts, showing the UK will shrink by 0.3% this year, Moran explains:

“This isn’t rocket science. The UK is the only developed economy with the added pressures of Brexit where businesses face extra costs, mountains of new red tape and amplified labour shortages.

“Our economy will continue to underperform until this incompetent Conservative government owns up to and fixes the issues caused by their botched Brexit deal.”

Rachel Reeves MP, Labour’s Shadow Chancellor, warns the IMF’s new economic outlook highlights that the UK is lagging behind.

Reeves says:

IMF projections that Britain will have a smaller economy by the end of the year, and the poorest growth in the G7 over this year and next, shows just how far we continue to lag behind on the global stage.

This matters not just because 13 years of low growth under the Tories are weakening our economy, but because it’s why families are worse off, facing a Tory mortgage penalty and seeing living standards falling at their fastest rate since records began.

The government should be easing the cost of living crisis now, by backing Labour’s plan to freeze council tax this year, funded by a proper windfall tax on oil and gas giants.

And they must get our economy growing - matching the ambition and plan behind Labour’s mission to secure the highest sustained growth in the G7.

Updated

Chancellor Jeremy Hunt has responded to today’s IMF forecasts:

Thanks to the steps we have taken, the OBR says the UK will avoid recession, and our IMF growth forecasts have been upgraded by more than any other G7 country.

The IMF now say we are on the right track for economic growth. By sticking to the plan we will more than halve inflation this year, easing the pressure on everyone.

This chart from the IMF’s World Economic Outlook shows the latest forecasts, and the changes compared with January.

IMF growth forecasts
IMF growth forecasts Photograph: IMF

As you can see, Spain got a 0.4% growth bump for this year (but they’re not a G7 member), while the UK’s projected downturn in 2023 was revised up to -0.3% from -0.6%.

And on inflation, the IMF forecast that Britain’s consumer prices index will average 6.8% in 2023, down from 9.1% in 2022, and then fall further to 3% in 2024.

Updated

The IMF is also forecasting that global growth will bottom out this year:

With the UK at the back of the pack:

Updated

Full story: UK economy forecast to shrink this year, says IMF

The UK economy is expected to shrink this year and will be at the back of the leading G7 countries at a time when a fresh outbreak of financial upheaval threatens the slowing global recovery, the International Monetary Fund has warned.

Stressing the growing risks of a hard landing for developed countries, the Washington-based body singled out the UK and the euro area as being particularly affected by rising energy costs and higher inflation, my colleague Larry Elliott reports from Washington DC.

The IMF slightly revised up its estimate of UK growth this year from the -0.6% pencilled in three months ago but still expected the economy to contract by 0.3%.

And here’s Larry’s analysis on the Fund’s latest assessment of the world economy:

Updated

IMF: Hard landing is 'much larger risk'

The IMF warns today that the global economy has reached another “highly uncertain moment” in its rocky recovery.

The Fund’s World Economic Outlook begins by pointing out that inflation reached multidecade highs last year in many economies, due to pent-up demand, supply chain problems and commodity price spikes following Russia’s invasion of Ukraine.

That led central banks to tighten aggressively by raising interest rates.

The Fund warns that “the fog around the world economic outlook has thickened”, partly due to the recent increase in financial market volatility due to jitters in the banking sector.

It fears that a ‘hard landing’ (where central bankers drive economies into recession) is a larger risk.

The WEO cautions that:

Uncertainty is high, and the balance of risks has shifted firmly to the downside so long as the financial sector remains unsettled.

The major forces that affected the world in 2022 — central banks’ tight monetary stances to allay inflation, limited fiscal buffers to absorb shocks amid historically high debt levels, commodity price spikes and geoeconomic fragmentation with Russia’s war in Ukraine, and China’s economic reopening — seem likely to continue into 2023.

But these forces are now overlaid by and interacting with new financial stability concerns. A hard landing— particularly for advanced economies—has become a much larger risk.

Policymakers may face difficult trade-offs to bring sticky inflation down and maintain growth while also preserving financial stability.

UK on track to be worst-performing G7 economy this year, says IMF

Newsflash: the UK is on track to be the worst-performing advanced economy this year.

The International Monetary Fund has forecast UK GDP will shrink by 0.3% in 2023, worse than other G7 countries.

That’s an improvement on the Fund’s previous forecasts, though, when the UK was expected to contract by 0.6% this year.

The IMF’s World Economic Outlook, just released, predicts that the UK will then grow by 1% in 2024.

The US, in contrast, is forecast to grow by 1.6% this year, and 1.1% in 2024.

The eurozone is expected to expand by 0.8% in 2023, and accelerate to 1.4% growth next year.

Germany, though, is forecast to shrink slightly, by 0.1%, in 2023, and grow by 1.1% in 2024.

France (+0.7%, then 1.3%), Italy (+0.7% then 0.8%) and Spain (+1.5% then 2%) are all seen growing this year and next.

As are Canada (+1.5% in both years), and Japan (+1.3% in 2023, then 1% in 2024).

Even Russia is expected to grow this year (by 0.7%) and in 2024 (by 1.3%), after a 2.1% contraction last year.

Updated

Labour’s shadow chancellor, Rachel Reeves, has said developments at the CBI were “incredibly concerning”, PA Media reports.

Responding to the sacking of Tony Danker, the head of the business organisation, Labour’s shadow chancellor told broadcasters during a visit to Brighton:

Obviously what is happening at the CBI is incredibly concerning and it’s important that these reviews are able to take their course.

Labour, like the government, have cut our ties and are not currently doing any engagement with the CBI whilst these inquiries are ongoing.

Updated

Meetings between ministers and the Confederation of British Industry remain paused while the organisation continues its investigation into misconduct allegations, Downing Street has said.

The dismissal of CBI chief Tony Danker will not end the move by ministers and officials to cancel engagements with the organisation, a No 10 spokesman told reporters.

The spokesman said:

His departure is a matter for the CBI, but we continue to expect any allegations to be taken seriously and for appropriate action to be taken in response.

While the CBI continues to investigate we will pause engagement by ministers and senior officials with the CBI.

The government suspended its relationship with the Confederation of British Industry last week, after the Guardian revealed multiple allegations of sexual misconduct by the lobby group’s staff.

Updated

As well as launching “a root-and-branch review” of its culture, governance and processes, the CBI is to create a new position of chief people officer. They will sit on its executive committee and report directly to the CBI’s board on all matters of workplace conduct and culture.

The CBI HR director, Lauren Adams, will fill the role on an interim basis while a “wide-ranging external recruitment process” is conducted.

The CBI’s board added this morning that:

The current independent and confidential channel outside the CBI for people to come forward with concerns and complaints about workplace conduct will be made permanent.

We also recognise the enormous strain this experience has placed on all our people and will continue to offer support to anyone who needs it.

Updated

The Financial Times reports that a former female CBI staffer who had previously raised a complaint over an inappropriate comment about her appearance by a senior CBI figure, welcomed the appointment of the new director-general to replace Tony Danker.

She said:

The board finally found its guts. Rain Newton-Smith will have the confidence of the staff and the members who know her to be on the right side of sexual misconduct issues.

Newton-Smith, the CBI’s former chief economist for over eight years, spent her early career as an economist at the Bank of England, and then Oxford Economics. She left the CBI in March to join Barclays as managing director for Strategy and Policy, Sustainability and ESG.

Updated

Danker: shocked by dismissed from the CBI

Tony Danker says he was ‘shocked’ to learn he has been dismissed by the CBI this morning.

Danker has tweeted that he was appalled to learn last week about the “revelations of awful events that occurred before my time in office”.

He adds he was “shocked to learn this morning that I had been dismissed from the CBI, instead of being invited to put my position forward as was originally confirmed”.

Danker also says he is “truly sorry” to have unintentionally made a number of colleagues feel uncomfortable, and wishes his former colleagues every success.

Elizabeth Gardiner, CEO at UK Whistleblowing charity Protect, says the CBI’s new director-general, Rain Newton-Smith, has an opportunity to address and change the organisation’s whistleblowing procedures.

Gardiner explains:

What CBI should be doing is reviewing its current arrangements, regular training of managers on how to be good recipients of bad news, and checking that staff are aware of and confident in the processes.

Whistleblowers provide employers a gift of information – an early warning that something is wrong. Failure to listen can lead to harm to individuals, organisations and the public interest.

Confidence among small US firms has dipped, as the inflation continues to worry business owners.

The US small business confidence index produced by NFIB (the National Federation of Independent Business) has fallen by 0.8 points to 90.1 in March, from 90.9.

This is the 15th month running that the index has been below its long-term average of 90%.

NFIB says twenty-four percent of owners reported inflation as their single most important business problem, down four points from last month.

The ratio of small business owners expecting better business conditions over the next six months remain at a net negative 47%.

NFIB Chief Economist Bill Dunkelberg says:

Small business owners are cynical about future economic conditions.

Hiring plans fell to their lowest level since May 2020, but strong consumer spending has kept Main Street alive and supported strong labor demand.

Updated

Over in Moscow, Russian President Vladimir Putin will discuss the situation on the currency market with Russia’s central bank chief and finance minister later on Tuesday, the Kremlin says.

The meeting comes as the Russian rouble dropped near a one-year low against the US dollar and the euro.

The rouble has lost almost 1% today to around 82.2 to the dollar, having last week hit its lowest level since March 2022.

After the full-scale invasion of Ukraine, the rouble slumped to 120/$, but then recovered as capital controls were imposed to prop up the currency.

A chart showing the rouble-US dollar exchange rate, where a higher reading shows a weaker rouble
A chart showing the rouble-US dollar exchange rate, where a higher reading shows a weaker rouble Photograph: Refinitiv

KKR buys stake in communications firm FGS Global

Deal news: The US private equity investor KKR has bought a 30% stake in financial PR firm FGS Global.

The deal values FGS Global at around $1.4bn, as had been rumoured last week.

Existing investor Golden Gate Capital is selling its entire stake to KKR. The group is also buying shares from senior employees at the firm and its largest investors, including London-based advertising giant WPP (which will still hold a majority stake), Reuters reports.

FGS was formed in 2020 through the merger of London’s Finsbury, Germany’s Hering Schuppener, and the Glover Park Group, before then buying US-based Sard Verbinnen in October 2021 (updated).

Finsbury was founded in 1994 by Roland Rudd, the brother of the former UK home secretary Amber Rudd and a leading campaigner against Brexit.

Rudd is now one of three co-chairs of FGS Global, alongside Carter Eskew and George Sard.

Mark Read, CEO of WPP, says KKR’s transaction “recognizes the tremendous value of the business and its potential for continued strong growth.”

As we reported last week:

Investment firms have made a series of deals in recent years for stakes in public relations companies, who advise big corporate clients on how to communicate with journalists on issues ranging from regular financial results to crisis management.

Updated

Here’s an explanation, published last weekend, about the allegations of misconduct by senior managers at the Confederation of British Industry:

The allegations have led some CBI members to consider whether they should leave the lobbying group:

Last week the Uk government suspended its relationship with the CBI, while the investigation into these fresh allegations was conducted.

Central banks will probably start cutting interest rates soon, predicts Professor Costas Milas, of the Management School at the University of Liverpool.

He tells us:

IMF predictions that central banks will cut interest rates soon will most likely materialize sooner than the Fund expects.

Why? The very latest movements in the Global Supply Chain Pressure Index (compiled by the Federal Reserve Bank of New York) which predicts inflation movements quite well (as I explain here) indicate that inflation pressures are receding extremely fast.

In fact, supply chain pressures have collapsed! This suggests to me that Central Banks will be “forced” to cut interest rates quite soon.

Updated

Back to economics… and investor morale in the euro zone has improved this month.

Research institute Sentix’s gauge of current conditions in the eurozone has hit its highest level in over a year, rising to -8.7 points for April after dipping to -11.1 in March.

However, Sentix’s economic expectations index remained at -13.0.

Sentix says its latest data is “better, but still not good”, and shows that the Eurozone economy continues to recover at the beginning of April.

They explain:

“There is no doubt that the euro zone economy has weathered the winter months better than many feared in the fall.

Full story: CBI dismisses director general Tony Danker after conduct complaints

Tony Danker, the boss of the Confederation of British Industry, has been dismissed with immediate effect after an investigation into complaints about his conduct in the workplace.

The CBI hired a law firm to investigate him after the Guardian approached the business group about a formal complaint that was made in January, as well a number of alleged informal reports of concerns over his behaviour.

The business lobby group said it wanted to make clear that Danker was not the subject of other complaints recently reported by the Guardian. Those other claims by more than a dozen women allege various forms of sexual misconduct by senior figures at the organisation.

However, the board of the CBI added they had determined that Danker’s conduct “fell short of that expected of the director general”.

The CBI’s plight is a warning to other UK organisations, and an opportunity to look at their own internal culture, writes journalist and broadcaster Josie Cox today.

She says the allegations of misconduct at the business lobbying group are another reminder that wherever there is money there is power… and that “where there is power, abuse – in some form – is frequently still rife”.

Cox explains:

Despite ostensible efforts by some of Britain’s biggest companies to create equal opportunities and appropriate representation for all genders and races within the workplace, businesses remain stubbornly skewed.

They’re predominantly led by white men and blighted by the pay gap and the authority gap, in which women find it more difficult to be taken seriously at work.

As a function of these chasms, troubling power dynamics allow for cultures of sexism and, in some cases, toxic masculinity to prevail.

More here:

Brian McBride, CBI president, says:

Rain is well-known and highly respected at the CBI, and by its membership. She is the right leader for the organisation, possessing deep knowledge of the challenges facing businesses who are trying to grow in these challenging economic times.

I have every confidence that she will provide the clear-sighted leadership that the CBI and UK business needs.

Updated

Newton-Smith pledges to lead CBI through 'challenging time'

Rain Newton-Smith, the CBI’s new director-general, is rejoining the business group from Barclays, where she recently became managing director for Strategy and Policy, Sustainability and ESG at Barclays.

Newton-Smith, who worked as the CBI’s chief economist from summer 2014 until this March, says:

It’s a huge privilege to be asked to return to the CBI to serve as its director-general. I passionately believe in the power of business to transform our society. I want the CBI to be an organisation of which we can all be proud. I am grateful and determined to lead the team through this challenging time.

I look forward to working with the team, our members and stakeholders as we work together to achieve sustainable growth.

Updated

Danker fired as CBI chief

Tony Danker, the head of the boss of the Confederation of British Industry, has been fired after an investigation into his conduct.

The board of the CBI has announced that Danker had been dismissed with immediate effect following the independent investigation into specific complaints of workplace misconduct against him.

He will be replaced by Rain Newton-Smith, a former CBI chief economist.

The business group’s board says:

The Board wishes to make clear he is not the subject of any of the more recent allegations in The Guardian but has determined that his own conduct fell short of that expected of the Director General.

The CBI adds that three other CBI employees are now suspended pending further investigation into a number of ongoing allegations.

Danker stepped aside as CBI chief in early March, after the Guardian approached the CBI about a formal complaint about his conduct that had been made in January.

Earlier this month, we reported that more than a dozen women have claimed to have been victims of various forms of sexual misconduct by senior figures at the Confederation of British Industry, including one who alleges she was raped at a staff party on a boat on the River Thames.

The CBI adds that:

While Fox Williams continues with the next phase of its inquiry, the CBI is liaising with the police and has made clear its intention to cooperate fully with any police investigations.

The CBI’s board says today:

The allegations that have been made over recent weeks about the CBI have been devastating. While investigations continue into a number of these, it is already clear to all of us that there have been serious failings in how we have acted as an organisation. We must do better, and we must be better.

We apologise to the victims of this organisational failure, including those impacted by the revulsion we have all felt at hearing their stories. Nobody should feel unsafe in their workplace

Updated

Shipping costs are continuing to ease, which should help to pull down inflation and lead to lower interest rates:

The recent banking crisis, and expectations that interest rates could soon peak, has spurred demand for cryptocurrencies such as Bitcoin, reports Victoria Scholar, head of investment at interactive investor.

That’s squeezing investors who had bet against Bitcoin, she reports:

“Bitcoin surpassed the psychological resistance level, $30,000 for the first time since June as the 2023 crypto rally continues. Bitcoin is up 80% against the US dollar so far this year but remains sharply below the peak from the final quarter of 2021.

Turmoil in the banking sector and speculation that the Fed could be nearing the peak of the rate hiking cycle have bolstered demand for cryptos, helping bitcoin stage a recovery after it logged a more than 60% slide last year, its second-worse annual performance on record. There is growing speculation that bitcoin is at the start of another bull run. Shorts have been getting squeezed this year, prompting more buying as the bears rush to cover their losing positions.”

Bitcoin hits $30,000, first time since June 2022

Bitcoin has hit a 10-month high this morning, as the crypto currency continues to rally.

Bitcoin has climbed to above $30,000 for the first time since last June, which is almost double the lows hit hit last autumn.

However, it’s still over 50% below the record highs set in November 2021, before sliding through 2022.

The price of bitcoin over the last five years
The price of bitcoin over the last five years Photograph: Refinitiv

Naeem Aslam, chief investment officer at Zaye Capital Markets, predicts the rally will continue, saying:

Bitcoin’s crypto winter is finally gone today, as the price has broken above a critical barrier level of $30,000. Bitcoin has already recovered about half of its losses from its all-time high, and it is up more than 100% from the crypto winter lows.

The present price pattern is expected to generate a lot of attention, as well as FOMO among investors, many of whom have already missed out as the price has regained its significant losses. Yet, we do feel that the moment has come to be a strategic investor in cryptocurrency, since we believe that the path of least resistance for Bitcoin is skewed to the upside and that the present surge is simply the beginning of what is to come.

Bill Blain, market strategist at Shard Capital, says he doesn’t have faith in crypto, citing its “zero legal utility”, regulatory vulnerability, and instability.

But, Blain writes, other traders who bought into bitcoin at the start of the year are sitting on profits, having concluded it was cheap at the start of the year.

I had my moment of market epiphany Sunday afternoon on the sailing club deck…. A chum told me he’s nearly doubled his money buying Bitcoin since buying in January at £13.75k and its now trading around £24.3k – he’s going to hold (“Hodl”) his sizeable bottom-fished position, confident it’s going to hit a new record high this year – at which point he will buy a new car. Nice.

Another sailing mate then told me he follows the candle charts, and reckons there are some seriously bullish signals revealed by “Bollinger Band” analysis of the Bitcoin price action – it’s going to break higher he confidently told me. Neither is a professional investor; they are smart guys watching the markets, looking to make some money. They know its going higher!

FTSE 100 hits one-month high

European stock markets have opened higher today, as traders digest the IMF’s forecast that interest rates will fall back.

In London, the FTSE 100 index has jumped by 54 points, or 0.7%, to 7795 points, its highest level in over four weeks, as trading resumes after the Easter break.

Investors are also cheered by the fall in China’s inflation, and factory prices, overnight.

UK consumers cut back on groceries, clothes shopping and eating out last month but streaming and pay TV subscriptions jumped as cash-conscious viewers switched to nights in.

The return of big hit series such as Succession, The Mandalorian and Ted Lasso fuelled a healthy 4.1% increase in spend on digital content and subscriptions in March, the highest year-on-year rise in five months, according to Barclays’ regular snapshot of consumer credit and debit card use.

However, consumers seeking to balance household budgets cut back going out to restaurants, which resulted in monthly spend falling 5.6%, while spend in clothing stores fell 3.4% – the sharpest drop in six months.

Here’s the full story:

Data from China overnight shows that its inflation rate has hit an 18-month low.

China’s consumer price index rose by just 0.7% in the year to March, the slowest pace since September 2021, the National Bureau of Statistics (NBS) said. That’s a slowdown on February’s 1% increase, and weaker than the 1.0% rise forecast by economists.

China’s factories continued to cut prices too, which could lead to lower prices worldwide. The producer price index (PPI) fell 2.5% year-on-year, the fastest pace since June 2020, accelerating from the 1.4% drop seen in February.

Stephen Innes, managing partner at SPI Asset Management, says the data shows China’s recovery is losing steam after pandemic restrictions were lifted.

Chinese consumer inflation read weaker than expected in March, while producer price inflation contracted steadily amid growing signs that a post-COVID economic recovery in the country, especially in the manufacturing sector, was losing steam.

With PPI falling, simply connect the dots as the data speaks loud and clear that consumer spending is still struggling to pick up.

Why the IMF might be wrong

Not all economists agree with the IMF’s view that the natural rate of interest will fall back to pre-Covid levels, once the inflation shock has abated.

Former US Treasury Secretary Lawrence Summers has predicted that rates will be substantially higher on average in the years ahead.

Last month, Summers suggested the real neutral rate might be in the range of 1.5% to 2% going forward. He believes that increased government borrowing, partly to fund defense spending, will keep borrowing costs higher.

Indeed, the IMF’s team of economists agrees there are a few reasons why its assumptions could be wrong.

For example, they say, government support may be difficult to withdraw, increasing public debt. Second, the costs of the green energy transition could also push up deficits. Thirdly, “deglobalization forces could intensify”, leading to both trade and financial fragmentation and pushing up the cost of borrowing.

World Bank chief raises 2023 global growth outlook slightly,

The head of the World Bank has revealed that it has lifted its growth forecast for this year.

Reuters has the details:

World Bank Group President David Malpass said on Monday that the lender has revised its 2023 global growth outlook slightly upward to 2% from a January forecast of 1.7% but the slowdown from stronger 2022 growth will increase debt distress for developing countries.

Malpass told a media briefing that the upward revision was due to an improved outlook for China’s recovery from COVID-19 lockdowns, with growth now pegged at 5.1% this year compared to 4.3% in the bank’s January Global Economic Prospects report.

Advanced economies, including the U.S. and in Europe, are also doing a bit better than the World Bank anticipated in January, Malpass said as the World Bank’s and International Monetary Fund’s Spring Meetings week kicked off.

While this is a growth upgrade for this year, it’s still weaker than the 3% growth which the World Bank expected nine months ago.

Malpass also warned that the recent turmoil in the banking sector and higher oil prices could weigh on growth prospects in the second half of this year.

Introduction: interest rates likely to return towards pre-Covid levels, says IMF

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Interest rates are set to fall back to levels seen before the outbreak of Covid-19 once inflation has been tamed.

That’s the message from the International Monetary Fund this morning, as top economists and central bankers head to Washington DC for its Spring meeting.

A team of IMF economists have examined the ‘natural rate of interest’ – the interest rate which keeps inflation on target while neither stimulating nor hampering economic growth.

Their conclusion: the recent increases in real interest rates are “likely to be temporary”, due to factors such as sluggish productivity growth and aging populations.

A graph showing interest rate changes across major economies

They predict the natural rates in advanced economies “will likely remain low”, while those in emerging markets are likely to drop towards those levels.

That would mean interest rates would fall towards the lows seen in the pandemic. In the UK, interest rates were cut from 0.75% to just 0.1% in early 2020 (they’re currently 4.25%).

The IMF say:

When inflation is brought back under control, advanced economies’ central banks are likely to ease monetary policy and bring real interest rates back towards pre-pandemic levels. How close to those levels will depend on whether alternative scenarios involving persistently higher government debt and deficits, or financial fragmentation materialize.

In large emerging markets, conservative projections of future demographic and productivity trends suggest a gradual convergence towards advanced economies’ real interest rates.

The natural rate is an important anchor for monetary policy, as central bankers try to set interest rates to keep rising prices in check without driving people out of work.

So if the IMF are right, it’s a boost for borrowers such as households struggling with mortgage payments. But, it would suggest central bankers could be left with less firepower to fight the next downturn, if major economies are saddled with chronically weak productivity and smaller workforces due to demographic changes.

The work is part of the IMF’s latest World Economic Outlook, which will be released later today. The Fund will also release a new Global Financial Stability Report as part of its annual spring meetings with the World Bank in Washington.

Kristalina Georgieva, the IMF’s managing director, warned last week that the global economy is heading for the weakest period of growth since 1990, as the surge in interest rates to fight inflation hits the global economy.

The agenda

  • 9am BST: China’s new yuan loans for March

  • 10am BST: Eurozone retail sales for February

  • 11am BST: NFIB index of small US business optimism

  • 2pm BST: IMF publishes latest World Economic Outlook

  • 3.30pm BST: IMF publishes latest Global Financial Stability Report

Updated

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