the times | Friday August 28 2020 1GM 37
Business
Philip Aldrick Economics Editor
America’s central bank will let inflation
overshoot its 2 per cent target under a
new monetary framework that will
keep interest rates lower for longer to
support jobs and growth.
Jerome Powell, chairman of the US
Federal Reserve, unveiled a “flexible
form of average inflation targeting”
and shifted the emphasis towards em-
ployment after a review into its policy
arrangements lasting almost two years.
The Fed will continue to target “a
longer-run inflation goal of 2 per cent”,
but periods of price growth below 2 per
cent will be made up during periods
where it is allowed to exceed 2 per cent.
Mr Powell said that overshoots would
be “moderate” and “for some time”.
Unlike present policy, it will be a
“strategy where undershoots are not
forgotten”, he told the Federal Reserve
Bank of Kansas City’s annual Jackson
Hole symposium.
The new approach is a big change in
the way the 2 per cent inflation man-
date is managed. Mr Powell said that it
was an attempt to prevent an “adverse
cycle of ever-lower inflation” that
would exhaust the Fed’s crisis-fighting
tools and risk condemning the country
to long-term economic stagnation.
The Fed has cut interest rates to zero
and increased quantitative easing by
$700 billion since March.
Until now, the Fed’s goal was to hit
2 per cent inflation but not rise above
that level. With the European Central
Bank and the Bank of England con-
ducting similar reviews, flexible aver-
age inflation targeting may soon
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Jul 30 Aug 7 17 25 Jul 30 Aug 7 17 25 Jul 30 Aug 7 17 25 Jul 30 Aug 7 17 25 Jul 30 Aug 7 17 25 Jul 30 Aug 7 17 25The founder of The Hut Group will
collect about £19.4 million a year in rent
from the company after striking a deal
to become its landlord before a flota-
tion valuing it at £4.5 billion.
The stock market listing, which will
be the first big London float since the
pandemic began, is also expected to
hand £50 million in fees to eight invest-
ment banks when The Hut Group
Hut Group founder will pocket £19m in rent after £4.5bn flotation
Ashley Armstrong Retail Editor raises about £1 billion and its stock
starts trading in three weeks’ time.
Matt Moulding, 48, started The Hut
Group in 2004, originally selling DVDs
online, and it has since grown to have
200 separate websites, including Look
Fantastic and Glossybox, the cosmetic
retailers, and a technology logistics
business, although it remains best
known for its My Protein brand.
The company, which employs 7,000
people, made £1.1 billion in sales last
year, underlying earnings of £111.3 mil-
lion and a pre-tax loss of £4 million.
Mr Moulding was opposed to a public
listing because of his concerns about
relinquishing control of the business.
However, the London Stock Exchange
said he could have a founder share to
veto takeovers. A founder share is un-
usual and will exclude The Hut Group
from tracker funds and FTSE indices.
It is not the only instance where the
business will flout typical corporategovernance standards, as Mr Moulding
will hold the dual titles of executive
chairman and chief executive.
He also is included in a share-based
incentive scheme that will hand him
shares worth £700 million if the com-
pany’s valuation reaches £7.25 billion in
the next two years. Mr Moulding said
that the scheme already had support
from other investors and was in return
for him diluting his stake from 60 per
cent to 20 per cent by selling shares inprivate fundraising rounds in the past
decade. About 500 of The Hut Group’s
staff will share £250 million if the com-
pany’s valuation grows by 40 per cent.
The Hut Group’s prospectus reveals
that before the initial public offering it
will transfer its property business,
which includes nine industrial sites, six
offices, two hotels and a health club, to
a separate company that will be owned
by Mr Moulding. The properties paid a
Continued on page 38, col 5Walmart in
joint bid to
buy TikTok
Tom KnowlesWalmart, the American supermarket
chain and owner of Asda, entered the
competition to buy TikTok yesterday as
the boss of the video sharing app
announced that he was quitting after
only three months in the role.
Walmart said that it had formed a
partnership with Microsoft to bid for
TikTok’s operations in the United
States. The world’s largest retailer is
trying to expand its presence online to
take on Amazon and to appeal to
younger consumers.
The surprise bid emerged as Kevin
Mayer, TikTok’s chief executive since
June, said that he was leaving. Mr
Mayer, 58, previously one of the most
senior executives at Walt Disney, said
in his resignation letter to staff that he
believed the role he had signed up for
would now “look very different” since
President Trump’s demands that the
company be sold.
Mr Trump has ordered Bytedance,
TikTok’s Chinese owner, to sell the
app’s American division by early
November or it will be banned in the
US. The order came amid national
security concerns that TikTok could be
handing over user data to the Chinese
government, something that Byte-
dance has always strongly denied.
TikTok had been enjoying a sharp
rise in popularity until the start of the
year, with two billion downloads world-
wide and 100 million users in the US.
The app lets users create and view
short video clips and is especially popu-
lar with teenagers.
Microsoft had expressed an interest
in buying TikTok, although it is said to
be keen to buy its whole global
operation rather than merely those in
America. Bytedance is believed to be
against such a global sale.
Walmart said it was “confident” that
its newly announced partnership with
Microsoft to buy TikTok would satisfy
the Trump administration. Walmart
shares jumped more than 5 per cent
after the news of its interest in the app
emerged.Federal Reserve plans flexible average targets
US inflation
will float to
help growth
become widespread. In an apparent
reference to Japan’s “lost decades”, Mr
Powell, 67, said: “We have seen this
adverse dynamic play out in other
major economies and have learnt that
once it sets in it can be very difficult to
overcome. We want to prevent such a
dynamic from happening here.”
He added that “downward risks to
employment and inflation have
increased”. Markets had been expect-
ing the announcement, but they wel-
comed confirmation, nonetheless.
After the speech, US government bor-
rowing costs fell, stock markets rose
and the dollar strengthened in a sign
that investors believe that the new
framework will help growth.
The framework subtly shifts the
policy emphasis towards full employ-
ment and, for the first time, to ensure
that it is inclusive. There will be a
“broad-based and inclusive goal” of
maximum employment, a nod to racial
equity and its role in promoting eco-
nomic growth.
“Our revised statement reflects our
appreciation for the benefits of a strong
labour market, particularly for many in
low and moderate-income communi-
ties, and that a robust job market can be
sustained without causing an unwel-
come increase in inflation,” Mr Powell
said.
Asked about the pandemic, he said
that a full jobs recovery could take
years. Despite “a lot of strength in the
economy,” parts of the services sector
“will find it very difficult to recover”, he
said. “That is millions of people who are
going to struggle to find work. We need
Continued on page 40, col 5Fall from Footsie is
another ITV repeat
The crisis of 2008 — the
year Alexandra Burke
won The X Factor — is set
to be revisited. Page 38KEN MCKAY/REX/SHUTTERSTOCK