FirstFT: Central banks put rate rises on the table

Bank of England governor Andrew Bailey raised the possibility of increasing interest rates by half a percentage point in early August as he toughened the UK central bank’s stance on battling rising prices.

Bailey said the BoE’s Monetary Policy Committee had an “absolute priority” to bring inflation back to its 2 per cent target as it faced the “largest challenge” to inflation control since gaining independence on interest rates in 1997.

June inflation is expected to hit another 40-year high of at least 9.3 per cent today. A half-percentage-point interest rate rise would be the bank’s largest since 1995.

The governor also raised the BoE’s thinking for the first time on selling some of the assets it bought under rounds of quantitative easing since 2009.

The European Central Bank will also broach raising rates by half a percentage point this week, outstripping its own guidance as it seeks to content with record inflation.

The increase would be its first in more than a decade, and a 50 basis point rise would end an eight-year experiment with negative rates.

Have any feedback on the newsletter? Let me know at firstft@ft.com or reply to this email. Thanks for reading FirstFT Europe/Africa — Jennifer

Five more stories in the news

1. Judge fast-tracks Twitter-Musk trial Chancellor Kathaleen McCormick set a timetable for a fast-track trial to start in October, siding with Twitter in its legal battle against Elon Musk. It was an early victory for Bill Savitt, the rock-star litigator who hopes to bring Musk to heel. Would a long wait have threatened Twitter’s business? Have your say in our latest poll.

• Go deeper: Images emerged on Monday of the Tesla chief partying on a yacht in Greece. Just 24 hours later, the judge put a crimp in his holiday, Sujeet Indap writes.

2. EY boss targets $10bn boost from Silicon Valley tie-ups Carmine Di Sibio, the Big Four firm’s global chair and chief executive, told the Financial Times that a break-up would win EY’s consulting division up to $10bn in fees by removing conflicts of interest that block partnerships with the world’s largest tech groups.

3. UK unions threaten strikes over ‘pitiful’ public sector raises Furious union leaders yesterday signalled a wave of industrial action after the government unveiled an average pay rise of about 5 per cent for 2.5mn public sector workers, below 40-year-high inflation of more than 9 per cent.

• Analysis: The government’s partial concession reflects the influence of market forces, as well as union activism, on wage growth — and pleased no one.

4. Ukraine and Russia near deal on grain blockade The sides are close to agreeing a deal to secure safe passage for millions of tonnes of grain through the Black Sea, but they remain at odds over security for ports and ships along the crucial food export route, according to people familiar with the UN-led negotiations.

5. Netflix loses 1mn subscribers The streaming leader continued to lose subscribers in the second quarter but tried to assuage investor fears about its business prospects. The loss was smaller than the 2mn users Netflix had forecast would cancel their accounts.

The day ahead

Tory leadership race A final vote by Tory MPs today will determine the two candidates to become the UK’s next prime minister and leader of the Conservative party. Foreign secretary Liz Truss is the bookmakers’ favourite. Prepare for a summer of glad-handing before the new leader is named on September 5.

South Asia presidential elections Sri Lanka’s parliament will pick Gotabaya Rajapaksa’s replacement at an extraordinary session, with acting leader Ranil Wickremesinghe squaring up against journalist-turned-politician Dullas Alahapperuma. In India, veteran politician Draupadi Murmu, who is backed by Prime Minister Narendra Modi’s Bharatiya Janata party, is expected to win a presidential poll. (FT, Hindustan Times)

Economic data The UK’s June consumer and producer price indices are expected to show inflation hit another 40-year high. The EU publishes flash consumer confidence figures, while its largest economy, Germany, releases June producer price index data.

Corporate earnings Second-quarter results are out for paints and coatings company Akzo Nobel, aluminium giant Alcoa, chipmaker ASML and electric carmaker Tesla. Lift manufacturer Kone publishes a half-year report.

What else we’re reading and listening to

Why young investors are not ready to give up on risk After struggling over the past decade to accumulate wealth through traditional means, many DIY traders are speculating in riskier corners of financial markets despite the meltdown in cryptocurrencies. Having come of age after the financial crisis, they no longer want to play by old rules.

‘The return of cash’ Rising interest rates are turning the $4.6tn money market fund sector from a drag on profits into a source of earnings as safety-seeking customers shift holdings into cash, in a rare piece of good news for asset managers whose fees have been hit by falling equity and debt markets.

Hot Money: Inside porn’s star chamber In the season finale of the FT’s Hot Money podcast, Alex Barker and Patricia Nilsson discover how Visa and Mastercard became the reluctant rulers of porn, and explore what the influence of credit card companies means for the industry today.

The investment drought is catching up with us In all the talk of “building back better” and making economies “match fit”, there is an unstated but tragic premise: for decades, most advanced economies did not build their futures but languished in an investment drought. The scandal is greater for being unacknowledged, writes Martin Sandbu.

Fast fashion is slowing down — for its own good There are signs that retailers are cracking down on the kind of profligacy enjoyed by online shoppers such as Cat Rutter Pooley. The obvious reason is margins. But it could also lead to more sustainable shopping.

Travel

Set between ice cap and ocean, the new Icefjord Centre in Ilulissat, on Greenland’s west coast, is Greenland’s biggest tourist destination. An hour boat ride away, in a village of just 50 people, the restaurant at the end of the world offers 18-course menus. Here’s Tim Ecott’s review.