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Pound Crashes After BOE Hikes By Most Since 1995, Starts Gilt Sales Yet Warns Of Crushing Stagflationary Recession

Pound Crashes After BOE Hikes By Most Since 1995, Starts Gilt Sales Yet Warns Of Crushing Stagflationary Recession

In what may be the most…



Pound Crashes After BOE Hikes By Most Since 1995, Starts Gilt Sales Yet Warns Of Crushing Stagflationary Recession

In what may be the most dovish double-rate hike in history, moments ago the Bank of England raised rates by the expected 50bps to 1.75% and announced it was starting gilt sales, yet at the same time the bank forecast a "long recession" driven by soaring recession (perhaps soaring stagflation would have been more appropriate).

The rate hike was supported by 8 of the 9 voters (Tenreryro voted for 25bps) who copied the RBA phrase that policy not on a "pre-set path" and also kept up a pledge to act forcefully again in the future if needed, potentially putting similar hikes on the table for coming meetings. While the UK central bank was the first major central bank to hike rates after the pandemic, and has moved at every meeting since December, it had thus far stuck to smaller, more usual moves. That left it risk of falling behind the curve, with some 70 other central banks having moved by a half-point or more this year.  The Federal Reserve has raised interest rates by 75 basis points at its last two meetings, while even the European Central Bank kicked off its cycle in July with a half-point rise.

The hike comes as officials predicted a UK recession will begin in the fourth quarter, and last all the way through next year. That’s the longest slump since the financial crisis. Officials expect the economy to shrink by around 2.1% in total. Inflationary pressures have “intensified significantly,” the BOE said. “The latest rise in gas prices has led to another significant deterioration in the outlook for activity in the United Kingdom.”

The BOE also boosted its forecast for the peak of inflation from 13.1% to 13.3% in October amid a surge in gas prices, and warned that price gains will remain elevated throughout 2023 as stagflation. That will sharpen a cost of living crisis that will see real disposable incomes fall more than at any time in around 60 years.

Alongside the decision, the BOE also laid out its plans for reducing the mammoth government bond holdings it amassed during the crisis. Active sales, the first carried out by a major central bank, are likely to start after a confirmatory vote in September and will be in the region of around £10 billion a quarter. Including redemptions, the BOE sees its stock of gilts declining around £80 billion in the first year of the program. Officials said there would be a “high bar” to altering the plan. Sales of the far smaller holding of corporate bonds will begin in the week starting Sept. 19, the BOE said. Taken together the moves represent a significant step up in the BOE’s battle against inflation.

The BOE also said it plans to sell gilts from its holdings evenly across “buckets” of short, medium and long-maturity gilts, and will not schedule a gilt sales operation on the same day as an operation by the UK’s Debt Management Office.

The BOE will also launch a new Short-Term Repo facility, designed to keep short-term market rates close to the BOE’s key interest rate as it reduces the size of its balance sheet.

Here are the details from the BOE announcement:


  • Eight members of the Committee judged that a 0.5 percentage point increase in Bank Rate to 1.75% was warranted at this meeting. For these members a more forceful policy action was justified.
  • Market rates imply more BoE tightening than May; show Bank Rate at 2.4% in 04 2022. 2.9% in Q4 2023. 2.4% in Q4 2024 (May: 1.9% in Q4 2022 2.6% in Q4 2023. 2 2% in 04 2024)


  • Committee is provisionally minded to commence gilt sales shortly after its September meeting subject to economic and market conditions being judged appropriate and to a confirmatory vote at that meeting.
  • The Committee judged that over the first twelve months of a sales programme starling in September a reduction in the stock of purchased gilts held in the APF of around GBP 80 billion was likely to be appropriate.
  • Given the profile of maturing gilts over this period this would imply a sales programme of around GBP 10 billion per quarter


  • United Kingdom was now projected to enter recession from the fourth quarter of this year and last five quarters
  • The Committee would be particularly alert to indications of more persistent inflationary pressures and would if necessary act forcefully in response


  • BoE estimates GDP fell 0.2% QIQ in q2 2022 (June forecast: -0.3% Q/Q) sees +0.4% Q/Q in q3 2022
  • BoE estimates GDP in 2022 +3.5% (May forecast: +3.75%), 2023 -1.5% (May: -0.25%), 2024 -0.25% (May: +0.25%). based on market rates
  • BoE monetary policy report estimates unemployment rate 3.67 in Q4 2022 (May forecast: 3.61%): Q4 2023 4.68% (May: 4.26%); Q4 2024 5.68% (May: 5.05%)
  • BoE estimates real post-tax household disposable income in 2022 -1.5% Y/Y (May: -1.75%). 2023 -2.25% (May: +1%), 2024 +0.75% (May: +2.5%)
  • BoE estimates wage growth +5.25% Y/Y in 04 2022 (May forecast +5.75%). 04 2023 +5.25% (May: +4.75%). Q4 2024 +2.75% (May: +2.75%)

The forecasts, based on average energy bills increasing by 75% to around £3,500 in October, also highlight the scale of the challenge awaiting the victor of the race to replace Boris Johnson as UK prime minister.

The BOE forecasts, based on a market path for interest rates that peaks at 3% next year, show the economy contracting about 1.25% in 2023 and a further 0.25% the following year. Unemployment, meanwhile, will climb to 6.3% by 2025. Inflation will peak above 13% later this year, and still be at 9.5% in the third quarter of 2023. After that it will fall rapidly toward the 2% target as the recession saps demand.

As Bloomberg notes, even after billions of pounds of government support for struggling households, families are set to be around 5% worse off by the end of 2023 with incomes falling both this year and next. So set against the gloomy outlook, the half-point hike, unprecedented since the BOE gained independence in 1997, is a sign officials are calling time on the era of cheap money and scrambling to keep pace with a wave of global tightening from its international peers.

The BOE decision feeds into what BBG described as an increasingly acrimonious debate about who is responsible for growing cost-of-living crisis. The BOE has been blamed in some quarters for acting too slowly in face of the growing inflation threat, and Liz Truss, who is favored to win the race Johnson as prime minister, has vowed to sharpen the BOE’s mandate if she takes power. The contest for the leadership has also made the task of forecasting the economy harder. The final two candidates are offering widely differing views on tax cuts and borrowing levels, with front runner Liz Truss advocating the more radical path. By convention, the BOE bases its forecasts on announced government policy, so the predictions don’t take into account anything brought up during the campaign.

With inflation soaring, the vote split on rates was more forceful than expected, with most economists expecting the nine-member Monetary Policy Committee to vote 7-2 for a 50 basis-point hike. Only Silvana Tenreyro backed a smaller move, saying rates may already have reached a level consistent with returning inflation to target and flagging worries about squeezed household incomes.

Minutes of the meeting showed officials kept in a pledge to move “forcefully” on rates if needed in future - language which paved the way for the half-point hike this month. Policy makers also added guidance that “policy was not on a preset path.”

Summarizing the uber-dovish-mega-hike, Vanda Research FX strategist Viraj Patel said that "this is what EM central banks do hike rates into a recession. Stagflation trade in the UK back on. And that's not good news for $GBP that cares about growth more than defensive rate hikes"

In kneejerk response, cable, which had risen into the decision, immediately tumbled as it realized the rate hikes will be limited in the face of the coming recession, and plunged more than 100 pips below 1.21 to a session low of 1.2086 so far as markets digested the grim projections from the BoE, especially the 5 quarter recession.

At the same time, Gilts spiked and sent yields sliding to session lows of 1.84% as the coming "long recession" means massive curve inversion.

Following the announcement, market pricing has a 25bps in Sept entirely priced in with a 30% chance of a 50bps rate hike. Further out, end-2022 pricing is relatively unchanged from pre-release levels with 100bps of further upside implied before the barrage of rate cuts and new QE begins.

Tyler Durden Thu, 08/04/2022 - 07:37

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War, peace and security: The pandemic’s impact on women and girls in Nepal and Sri Lanka

The impacts of COVID-19 must be incorporated into women, peace and security planning in order to improve the lives of women and girls in postwar countries…



Nepalese girls rest for observation after receiving the Moderna vaccine for COVID-19 in Kathmandu, Nepal. (AP Photo/Niranjan Shrestha)

Attention to the pandemic’s impacts on women has largely focused on the Global North, ignoring countries like Nepal and Sri Lanka, which continue to deal with prolonged effects of war. While the Nepalese Civil War concluded in 2006 and the Sri Lankan Civil War concluded in 2009, internal conflicts continue.

As scholars of gender and war, our work focuses on the United Nations Security Council Resolution 1325 on women, peace and security. And our recently published paper examines COVID-19’s impacts on women and girls in Nepal and Sri Lanka, looking at policy responses and their repercussions on the women, peace and security agenda.

COVID-19 has disproportionately and negatively impacted women in part because most are the primary family caregivers and the pandemic has increased women’s caring duties.

This pattern is even more pronounced in war-affected countries where the compounding factors of war and the pandemic leave women generally more vulnerable. These nations exist at the margins of the international system and suffer from what the World Bank terms “fragility, conflict and violence.”

Women, labour and gender-based violence

Gendered labour precarity is not new to Nepal or Sri Lanka and the pandemic has only eroded women’s already poor economic prospects.

Prior to COVID-19, Tharshani (pseudonym), a Sri Lankan mother of three and head of her household, was able to make ends meet. But when the pandemic hit, lockdowns prevented Tharshani from selling the chickens she raises for market. She was forced to take loans from her neighbours and her family had to skip meals.

Some 1.7 million women in Sri Lanka work in the informal sector, where no state employment protections exist and not working means no wages. COVID-19 is exacerbating women’s struggles with poverty and forcing them to take on debilitating debts.

Although Sri Lankan men also face increased labour precarity, due to gender discrimination and sexism in the job market, women are forced into the informal sector — the jobs hardest hit by the pandemic.

Two women sit in chairs, wearing face masks
Sri Lankan women chat after getting inoculated against the coronavirus in Colombo, Sri Lanka, in August 2021. (AP Photo/Eranga Jayawardena)

The pandemic has also led to women and girls facing increased gender-based violence.

In Nepal, between March 2020 and June 2021, there was an increase in cases of gender-based violence. Over 1,750 incidents were reported in the media, of which rape and sexual assault represented 82 per cent. Pandemic lockdowns also led to new vulnerabilities for women who sought out quarantine shelters — in Lamkichuha, Nepal, a woman was allegedly gang-raped at a quarantine facility.

Gender-based violence is more prevalent among women and girls of low caste in Nepal and the pandemic has made it worse. The Samata Foundation reported 90 cases of gender-based violence faced by women and girls of low caste within the first six months of the pandemic.

What’s next?

While COVID-19 recovery efforts are generally focused on preparing for future pandemics and economic recovery, the women, peace and security agenda can also address the needs of some of those most marginalized when it comes to COVID-19 recovery.

The women, peace and security agenda promotes women’s participation in peace and security matters with a focus on helping women facing violent conflict. By incorporating women’s perspectives, issues and concerns in the context of COVID-19 recovery, policies and activities can help address issues that disproportionately impact most women in war-affected countries.

These issues are: precarious gendered labor market, a surge in care work, the rising feminization of poverty and increased gender-based violence.

A girl in a face mask stares out a window
The women, peace and security agenda can help address the needs of some of those most marginalized. (AP Photo/Niranjan Shrestha)

Policies could include efforts to create living-wage jobs for women that come with state benefits, emergency funding for women heads of household (so they can avoid taking out predatory loans) and increasing the number of resources (like shelters and legal services) for women experiencing domestic gender-based violence.

The impacts of COVID-19 must be incorporated into women, peace and security planning in order to achieve the agenda’s aims of improving the lives of women and girls in postwar countries like Nepal and Sri Lanka.

Luna KC is a Postdoctoral Researcher at the Research Network-Women Peace Security, McGill University. This project is funded by the Government of Canada Mobilizing Insights in Defence and Security (MINDS) program.

Crystal Whetstone does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

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Target Sets Sights on Holiday Season, Has Plan for High Inventory

Target said that it still expects spillover from inventory rightsizing to the tune of $200 million in the third quarter.



Target said that it still expects spillover from inventory rightsizing to the tune of $200 million in the third quarter.

Target's  (TGT) - Get Target Corporation Report strategy is paying off as the company's stock falls on heavy volume following its earnings release. 

Normally, a profit miss as wide as Target's, 39 cents per share vs. expectations of 72 cents per share, would result in a bigger drop than Target's, but the retailer has been prepping the market for this miss all summer. 

The inventory the company built up during the height of the pandemic, as Americans shopped more from home, needs to go, and the only way get rid of the excess product is deep discounts. 

"Back in June, we announced that our team would be undertaking a bold effort to rightsize our inventory position in the categories for which demand patterns have radically changed," CEO Brian Cornell said during the company's earnings call. "While this decision had a meaningful short-term impact on our financial results, we strongly believe it was the best path forward."

Now, looking forward the company sees some overhang for the third quarter, but expects a big holiday season ahead. 

While some fear a recession and what it might do to the economy, Target is convinced that the holiday season will be strong.

Image source: John Smith/VIEWpress.

Target Aims for Holiday Season

While Target is focused on the back-to-school season currently underway, the company expects "spillover" from its inventory issues to be present during the third quarter to the tune of $200 million. 

But the company's own checks suggest that its shoppers are excited about the holiday season. 

"The one thing that seems to be very consistent is a guest and consumer who says they want to celebrate the holiday seasons so we certainly expect that they are going to be celebrating Halloween this year and actively trick or treating and hosting parties with friends and family," Cornell said.

"We know they're looking forward to Thanksgiving and they're going to look forward to celebrating the Christmas holidays and that comes down each and every week as we survey consumers and talk to our guests so that gives us great optimism for our ability to perform during these key holiday seasons"

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Not only does Target expect a strong quarter, but the company also expects favorable comps as fourth quarter headwinds from a year ago aren't present this time around. 

"Guests already have their sights set on upcoming holidays and seasonal moments in Q3 and beyond," Cornell said.

Target's Q2 Collapse

Target said adjusted earnings for the three months ending in July were pegged at 39 cents per share, down 89% from the same period last year and well shy of the Street consensus forecast of 72 cents per share.

Group revenues, Target said, rose 3.5% to $26 billion, essentially matching analysts' estimates of a $26.04 billion tally. Target said same-store sales rose 2.6%, again shy of the Refinitiv forecast of 3.2%, while operating margins fell to 1.2%, below the group's July guidance of a 2% level. 

Earlier this summer, Target cautioned that its bigger-than-expected 35% build-up in overall inventories over the first quarter would trigger price cuts, adding that deeper discounts would be needed to shift the excess goods onto a customer base that was already pulling back on discretionary spending.

Walmart  (WMT) - Get Walmart Inc. Report, Target's larger big box rival, said Tuesday that improving spending trends, as well as actions the group has taken to shift excess inventory, will ease some of the pressures it expects to face in terms of overall profits over the back half of the year.

Walmart said adjusted earnings for the three months ended in July came in at $1.77 per share, down one penny from the same period last year but well ahead of the Street consensus forecast of $1.62 per share.

Group revenues, the company said, were tabbed at $152.9 billion, an 8.4% increase from last year that topped analysts' estimates of $150.81 billion. U.S. same-store sales rose 6.5% from last year, the company said, firmly topping the Refinitiv forecast. 

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Why Is No One at Nike Working This Week?

And will the move gain broader acceptance among American employers?



And will the move gain broader acceptance among American employers?

You go into an office, pull at the door and find that it doesn't give and nobody's there. 

It may sound like the start of the common rushing-to-the-office-on-a-Saturday nightmare but, more and more, collective time off is being embraced by employees as part of a push for a better work culture.

While professional social media platform LinkedIn  (MSFT) - Get Microsoft Corporation Report and dating app Bumble  (BMBL) - Get Bumble Inc. Report had already experimented with collective time off for workers, the corporate ripples truly began with Nike  (NKE) - Get Nike Inc. Report.

In August 2021, the activewear giant announced that it was giving the 11,000-plus employees at its Oregon headquarters the week off to "power down" and "destress" from stress brought on by the covid-19 pandemic.

"In a year (or two) unlike any other, taking time for rest and recovery is key to performing well and staying sane," Matt Marrazzos, Nike's senior manager of global marketing science, wrote to employees at the time.

Nike Is On Vacation Right Now

The experiment was, not exactly unexpectedly, very well-received — a year later, the company instituted its second annual "Well-Being Week." Both the corporate headquarters in Beaverton, Ore., and three Air Manufacturing design labs with over 1,500 employees are closed for a collective paid vacation from Aug. 15 to 19.

"We knew it would be impactful, but I was blown away by the feedback from our teammates [...]," Nike's Chief Human Resources Officer Monique Matheson wrote in a LinkedIn post.

"Because everyone was away at the same time, teammates said they could unplug – really unplug, without worrying about what was happening back at the office or getting anxiety about the emails piling up."


Of course, the time off only applies to corporate employees. To keep the stores running and online orders fulfilled but not exacerbate the differences between blue and white collar workers, Nike gave its retail and distribution employees a week's worth of paid days off that they can use as they see fit.

Nike has tied the change to its commitment to prioritize mental health. In the last year, it launched everything from a "marathon of mental health" to a podcast that discusses how exercise can be used to manage anxiety and depression.

Rippling Through the Corporate World?

But as corporations are often criticized for turning mental health into positive PR without actually doing much for employees, the collective week off was perhaps the most significant thing the company did for workers' mental health.

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The practice of set office closures has long been common practice in many European countries. In France, not only corporate offices but even restaurants and retail stores empty out over the month of August for what is culturally considered sacred vacation time. 

But as American work culture prioritizes individual choice and "keeping business going" above all else, the practice has been seen as radical by many corporate heads and particularly small businesses that may find it more difficult to have such a prolonged drop in business. 

But in many ways, the conversations mirror some companies' resistance to remote work despite the fact that one-fourth of white-collar jobs in the U.S. are expected to be fully remote by 2023

"This is the kind of perk that makes employees want to stay," industry analyst Shep Hyken wrote in a comment for RetailWire. "And knowing they can’t completely shut the entire company down, I like the way they are compensating the distribution and retail store employees."

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