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Bank of England and its Monetary Policy!

The Monetary Policy Committee (MPC) voted unanimously that it would leave its benchmark rate at 0.1 per cent whilst maintaining its target for total stock of asset purchases under the quantitative easing (QE) program at £745 billion, The Bank of England (BOE) announced in September. To summarize BoE’s announcements, at one of its meetings ending on the 16th of September 2020, the MPC‘s vote to “the BOE to continue and maintain its existing programs of UK government bond and sterling non-financial investment grade corporate bond purchases, financed by the insurance of the central bank reserves, maintaining the target for the total stock of these purchases at £745 billion”.  The committee issued warning statements that the outlook for the economy remains “unusually uncertain”, indicating the direct impact of COVID-19 on the economic growth and the shift to a comprehensive free-trade agreement with the European union (EU) on January 1, 2021, setting as the key factors for the coming months.

The Bank of England’s Monetary Policy committee set a policy to meet its 2 per cent inflation target whilst sustaining growth and employment. Since the inflammation has fallen from 0.1 per cent in July to 0.2 per cent in August. The UK Government’s Eat Out to Help out Scheme and the cut in the Value Added Tax (VAT) for hospitality, holiday accommodation and attractions weighing heavily on prices, a concern was raised that the MPC’s inflation target would not be met for some time. And just as predicted the Bank’s inflation now will be around 2 per cent in two years’ time, on a condition of the prevailing market yields. Further predictions of the inflammation remaining below 1 per cent until the very end of the 2020. A promoted growth pressure for the rate setting committee to adopt an even more amicable stance. The low inflation rate points promoted the exchange of open letters between Andrew Bailey, the BoE governor, and Rishi Sunak, the Chancellor of the Exchequer, as published by the Bank with its monetary-policy announcement.

After that being made Bank of England acknowledged the fact that the UK economy appeared to be in a stronger position than it was a month ago. “Recent domestic economic data have been a little stronger than the Committee expected at the time of the August Report, although, given the risks, it is unclear how informative they are about how the economy will perform further out,” observed the bank after adding the recent Covid-19 cases might still have the potential to keep economic activities might be subdued for more time than expected usually which was not the case earlier. And also as warned by the bank there remains a risk of a more persistent period of elevated unemployment than in the central projection. And with this prediction there can be potential loss of employment. The unemployment rate is expected to reach 7.5 percent. The furlough scheme was preventing millions of workers from being laid off and it ending in the year end, there will be a restrictive economic activity and further monetary loosening could be well implemented over the coming year. 

The BOE released a statement, “The path of growth and inflation will depend on the evolution of the pandemic and measures taken to protect public health, as well as the nature of, and transition to, the new trading arrangements between the European Union and the United Kingdom. It will also depend on the responses of households, businesses and financial markets to these developments.”

For the quarter end of 2020, the BOE expected a gross domestic product (GDP) to be around 7 percent below its fourth-quarter-2019 level, which was stronger than the previously made interpretations.

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Goldman banker hired by the Citi bank

Citigroup has hired Luisa Leyenaar-Huntingford from Goldman Sachs. This new hire is to co-head its global infrastructure franchise. Because, it seeks to win more business from cash-rich investment firms focusing on infrastructure deals. Leyenaar-Huntingford will be based in London. Responsibility will be shared with Todd Guenther in New York.

The pair will work closely with industry teams covering healthcare, industrials, natural resources and clean energy transition (NRCET), technology and communications. Leyenaar-Huntingford helped in the establishment of the Goldman’s infrastructure franchise in her time at the Wall Street bank. They will team up with Citi’s Iberia co-head of banking, capital markets and advisory (BCMA) Jorge Ramos will continue to be a senior member of the global infrastructure franchise.

The infrastructure sector is poised for further growth, according to the memo. The memo was released by Citi’s global co-heads of the alternative assets group Anthony Diamandakis and John Eydenberg, and its EMEA head of BCMA Nacho Gutierrez-Orrantia. There was significant private investment demand across the globe to deal with environmental, energy, transportation, waste, communication, digital and other social needs.

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Banks make slow progress on UK gender pay

Major banks in Britain made a slight dent in their gender pay gaps. Several insurers went backwards. Companies in Britain with more than 250 employees have been required to publish the difference between the pay and bonuses of their male and female employees. They got a reprieve due to the pandemic, last year. The financial services sector has shown one of the largest genders pay gaps in Britain. The lack of women in senior jobs is the main reason.

Pay gap data from 21 major financial institutions showed a narrowing in their average mean gender pay gap. This is just 0.4 percentage points. Banks alone had a pay gap which narrowed by one percentage point. Ann Francke, chief executive of the Chartered Management Institute said that the UK’s financial services industry has often been singled out. It really does have to get its house in order. Goldman Sachs had the widest gender pay gap in the year to April 2020. Goldman posted a gender pay gap of 51.8%. The bank told the staffs that narrowing the gap further was a critical priority. A spokesperson for banking lobby group UK Finance said, that there is clearly more still to be done.

FTSE 100 insurers Prudential, Legal & General and M&G reported a widening in their pay gaps. Prudential’s UK gender pay gap widened to 45.2%. M&G also reported a widening in its pay gap in the most recent year to 30.5%. The M&G spokesperson said that they are determined to narrow their gender pay gap and will do this by achieving better representation of women in all roles at all levels of our organization. Legal & General’s mean gender pay gap widened to 30.8%.

The insurer said that the legal & general is tackling the underlying causes of its pay gap. This is by creating a more diverse workforce and a more inclusive culture through sustained, long-term action. Admiral had a gender pay gap last year of 12.8%. The 21 firms surveyed were Barclays, HSBC, Lloyds, NatWest, Standard Chartered, Bank of America Merrill Lynch, Goldman Sachs International, JPMorgan, Morgan Stanley, UBS, Credit Suisse, Deutsche Bank, PGMS (a Phoenix unit), abrdn, Schroder Investment Management, St James’s Place, Legal & General, Prudential, Admiral Group, Aviva and M&G.

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BOJ to lower inflation target-Japan’s finance minister

Japan’s outgoing finance minister, Taro Aso, said that he had proposed lowering the central bank’s 2% inflation target. This is when the prices took a hit from plunging oil prices. He was the finance minister for nearly nine years. The slump in oil price was among the main reasons the government could not officially declare an end to deflation. In his final news conference as finance minister, Aso said that he proposed to Governor Kuroda that, with oil prices falling this much, it would be hard to achieve 2% inflation. Hence, the target must be lowered at some point. He stated this by referring to Bank of Japan (BOJ) chief Haruhiko Kuroda.

Aso also said that the governor said he would do his best to achieve the target. This is stated by adding that policymakers must scrutinise at some point, why the BOJ’s inflation target of 2% has not been met. The remarks highlight how the government and lawmakers distanced themselves from the BOJ’s target years ago, despite central bank reassurances that achieving the target was possible by maintaining or increasing stimulus.

Aso was deeply involved in negotiations with the BOJ. After Kuroda took over as governor, he deployed a massive asset-buying program. This is for pulling Japan out of deflation. Aso supported the BOJ’s stimulus efforts. He is a member of the cabinet. And also, had raised many doubts that monetary policy alone can reflate the economy out of the doldrums. New Prime Minister Fumio Kishida is set to form a cabinet.

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