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Interest rates will have to be raised higher than initially hoped in the face of inflationary pressures, the Bank of England (BoE) governor has suggested.

Speaking at an International Monetary Fund event in Washington, Andrew Bailey also said there had been “a very clear and immediate meeting of minds” with new Chancellor Jeremy Hunt on the need for financial stability and the measures to achieve it.

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It comes after Mr Hunt has said there “were mistakes” in last month’s government mini-budget, and pointed out some taxes may have to rise and others might not fall as much as planned.

He added it was an error to “fly blind” by not accompanying the “fiscal event” with an economic forecast by the Office for Budget Responsibility (OBR), which many argue sent the financial markets into turmoil.

The BoE is due to announce its next decision on interest rates, which will impact household mortgages, on 3 November and many investors think it will either raise them from their current level of 2.25% to 3% or possibly 3.25%, both of which would be much bigger moves than usual.

Mr Bailey said: “We will not hesitate to raise interest rates to meet the inflation target.

“And, as things stand today, my best guess is that inflationary pressures will require a stronger response than we
perhaps thought in August.”

The bank previously predicted the rate of inflation would peak at 11% in October, while its goal was 2%.

Mr Bailey said the bank would assess the impact of the government’s energy support scheme and the 31 October budget statement of Mr Hunt, who took up the role on Friday after Kwasi Kwarteng was sacked following the economic chaos fuelled by his unfunded tax cut plans.

He added: “The MPC (Monetary Policy Committee) will respond to all this news at its next meeting in just under three weeks from now.

“This is the correct sequence in my view. We will know the full scope of fiscal policy by then.”

Jeremy Hunt and Andrew Bailey. Pic: HM Treasury
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Andrew Bailey says there is a ‘meeting of minds’ with the new chancellor. Pic: HM Treasury

In a further major U-turn on Friday, Prime Minister Liz Truss scrapped a freeze in corporation tax and said she would instead allow it to rise from April, as planned by Boris Johnson’s government.

The government had already rowed back on ditching the top 45p tax rate for the highest earners in the face of a Tory backlash.

Ms Truss also said spending would increase by less than planned.

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Mr Bailey said: “I can tell you that I spoke to Jeremy Hunt, the new chancellor, yesterday (Friday).

“I can tell you that there was a very clear and immediate meeting of minds between us about the importance of fiscal sustainability and the importance of taking measures to do that.

“Jeremy is now working on what will be the fiscal statement. It’s not for me and it’s not appropriate for me to constrain the choices he makes.

“But a very clear message I would give, and it’s a clear message for everybody, including a clear message for markets.

“I can tell you there is a very clear and immediate meeting of minds on the importance of stability and sustainability.”

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‘It was a mistake to fly blind’

Mr Bailey also indicated his concerns over the direction taken by the former chancellor, pointing to a statement he issued in the wake of the mini-budget.

He said: “I felt I had to. It’s not something I make a habit of doing but given the situation.

“I also don’t make a habit of commenting on fiscal policy as a rule, because that’s not my job.

“But I made two points on fiscal policy… which are of clear relevance to the central bank.

“One was to emphasise the importance of sustainability of fiscal policy and the second, which was part of that, was to emphasise the need to have the Office for Budget Responsibility involved – that flying blind is not the way to achieving sustainability.”

Mr Bailey said the bank was able to operate monetary policy – chiefly interest rates – to manage the economy and also make financial stability interventions to address issues such as the recent surge in British government bond yields that threatened some pension funds.

The BoE ended its emergency bond-buying on Friday.

“In these difficult times, we need to be very clear on this framework of intervention,” Mr Bailey said.

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Japan could be hours away from running out of Asahi

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Japan could be hours away from running out of Asahi

Japan could be hours away from running out of Asahi, the country’s most popular beer.

Dozens of factories nationwide have ground to a halt following a cyber attack on Monday.

The breach disabled the company’s ordering and delivery systems – and also took its call centre operations offline.

Supermarkets and Japanese pubs known as izakayas risk running super dry, with some retailers raising fears of potential panic buying.

Reuters file pic
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Reuters file pic

According to NHK, Asahi Group has now had to suspend plans to launch new products including soft drinks, coffee and throat lozenges.

One wholesaler expects to run out of beer kegs by Saturday at the latest, meaning they’ll no longer be able to supply booze to retailers.

They are now considering whether to start selling other brands as a temporary measure.

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Akira Kudo, who runs an izakaya in Tokyo, has been told that one of the two brands of Asahi he regularly purchases is now out of stock.

He’s now unable to predict when pints can be poured again.

“We have received beer from the wholesaler to replace Asahi, but we would like to avoid using other manufacturers if possible, so we will consider our options until the very last minute,” Akira added.

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Reuters file pic

A shortage may leave Japanese drinkers unimpressed. While there are other breweries in the country, Asahi has a fiercely loyal following.

Figures from Kirin Holdings suggest that the typical consumer drank 34.5 litres of beer a year in 2022, the equivalent of 54 large bottles.

Asahi executives are now consulting with the police and trying to determine whether the company has fallen victim to ransomware.

They have stressed that no personal information or customer data has been leaked.

Brewing operations outside of Japan – including in the UK – are also unaffected.

There have been a series of high-profile cyber attacks on well-known brands in recent months – including Marks and Spencer, the Co-op and Jaguar Land Rover (JLR).

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Jaguar Land Rover cyber attack: ‘We need certainty’ on aid, supplier pleads

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Jaguar Land Rover cyber attack: 'We need certainty' on aid, supplier pleads

A member of cyber attack-hit Jaguar Land Rover’s (JLR) supply chain has told Sky News the government must act to safeguard the sector as it has seen no financial relief to date.

Mike Beese, who owns Walsall-based Genex UK, was speaking as an industry body complained that support revealed by the government last week was failing to reach suppliers.

While unveiling a £1.5bn loan guarantee to JLR last Saturday, Business and Trade Secretary Peter Kyle said it would “help support the supply chain and protect skilled jobs in the West Midlands, Merseyside and throughout the UK.”

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Many interpreted the liquidity offer as a bailout, of sorts, that JLR would draw down on and distribute to ease pressure on direct and indirect suppliers.

Businesses affected by the production shutdown are now arguing they need the support they thought they were being promised by the Secretary of State.

It is unclear how Mr Kyle’s department and the chancellor saw the loan guarantee working in practice.

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JLR is understood to have not seen a need to draw on any such arrangement to date as its direct suppliers – the companies it deals with – have continued to be paid through existing funds.

It expects that money to trickle down to lower tiers of that supply chain.

The production shutdown has entered a second month and there is no visibility on when factories will get back to full speed.

Mr Beese said it was for this reason that the government had to intervene, potentially through a loan scheme for suppliers. “We need certainty”, he declared.

Pic: Genex UK
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Pic: Genex UK

He said of his own customers: “We need that money to come in so we can pay our suppliers. “That money needs to cascade down the tiers,” he added [but] “it’s not going to be enough and you’ve got to make that up at some point.

Mr Breese, who employs 17 people and provides parts for several major JLR suppliers, said he attached no blame to JLR, which has been losing at least £50m a week since the attack in late August.

He also laid no fault at the door of the companies he supplied. “Only the government” could bring the relief the industry needed, he argued, while explaining that terms from lenders were out of reach given the scale of the uncertainty.

Commenting on the toll the crisis was taking, Mr Beese added: “It’s very stressful… people in the same boat are ringing me to be paid. “My staff all need certainty as well… these people aren’t just a number, they have families”, he said.

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Inside factory affected by Jaguar Land Rover shutdown

The president of the Confederation of British Metalforming (CBM), Stephen Morley, said: “We need to find a way to get money quickly to where it is needed most, to prevent the supply chain from completely collapsing and that could be an additional type of loan.

“JLR is rightly focused on getting payments through to their first-tier suppliers, and it’s best we allow them to complete that process.

“Our focus now must be on ensuring that second tier and smaller suppliers in the chain are supported, so the whole framework is in place when production restarts.”

JLR revealed earlier this week that it planned to resume limited production “in the coming days” as it continues efforts to restart key IT systems.

No firm date has sine been announced.

A spokesperson for JLR said: “As the controlled, phased restart of our operations continues, we are delivering solutions to support our suppliers through the period of disruption caused by the cyber incident.

“This includes establishing a supplier help desk with additional resources, putting in place a manual payment system to clear down outstanding invoices, and working to re-establish the automated supplier payment systems.

“We would like to thank everyone connected with JLR for their continued patience, understanding and support. We know there is much more to do but the foundational work of our recovery is firmly underway, and we will continue to provide updates as we progress.”

A spokesperson for the Department for Business and Trade said: “We acted swiftly to protect JLR, recognising the importance of the tens of thousands of people they employ directly and indirectly and to provide the company with liquidity at a key time.

“We continue to work with JLR and suppliers directly to understand the impact of the cyber attack – including on tier 2 and tier 3 suppliers – and how the support put in place is helping them.”

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Tesco promises ‘strong deals’ amid ‘intensive’ price war – as profits set to hit £3bn

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Tesco promises 'strong deals' amid 'intensive' price war - as profits set to hit £3bn

The UK’s most popular supermarket has said it is to introduce “strong deals” over the next three months as it prepares for Christmas.

It’s being done as Tesco chief executive Ken Murphy said he expected people to spread Christmas spending over a wider period to be more manageable and affordable.

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The supermarket price war, spurred by grocers competing to lower costs and win customers, “could be even more intensive” over the next months, Mr Murphy said.

Tesco, which is the UK’s number one supermarket by market share, has been successful in this fight, saying it was “continuing to win with customers”.

Defending higher profits

As a result, it said on Thursday that it expected annual profit to be higher than first thought, in the region of £2.9bn to £3.1bn.

It’s attracted criticism from the union Unite, whose general secretary Sharon Graham said Tesco “has profited from the cost-of-living crisis, making a fortune through unfairly inflating grocery prices”.

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Warning on food inflation ahead

But Tesco’s chief financial officer Imran Nawaz defended the company’s profits, saying its investment to bring costs down “worked better than we thought”.

“When you sell more, you make more.”

This was the biggest contributor to the higher profit outlook, he added.

‘Enough is enough’

A lot of the overall price rises in the UK, however, are due to policy measures, Mr Murphy said, referring to a new plastic packaging tax and higher employers’ national insurance contributions.

When asked what the chain hoped to see in the upcoming 26 November budget, Mr Murphy said he didn’t want it to be “harder for the industry to deliver great value for customers”.

After last year’s budget delivered “substantial additional operating costs”, he said, “enough is enough”.

The CEO said he had made “no decision” and “can’t speculate” on whether Tesco would close shops if its larger stores are not made exempt from paying business rates.

The company pays more than £700m a year in tax on premises, he added.

Consumer trends

The supermarket chain has also benefited from the trend it observed of people cooking at home and eating in more, it said.

There’s been an uptick in sales of fresh food and a “meaningful increase” in cooking from scratch.

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This could be a hangover from the COVID-19 era, maybe due to the growth of streaming services, or potentially a money-saving exercise, Mr Murphy said.

“It’s hard to put your finger on the single reason, but it’s definitely a trend”.

Similarly, Tesco’s luxury own-brand line continued to grow in popularity with double-digit sales growth for the third year in a row.

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