The Times - UK (2022-02-23)

the times | Wednesday February 23 2022 35

Business

Emily Gosden Energy Editor

Oil prices came within a whisker of
hitting $100 a barrel and gas prices
surged yesterday as the Ukraine crisis
escalated.
Brent crude, the global benchmark
oil price, touched $99.50 a barrel, the
highest since September 2014, after
Moscow ordered troops into two break-
away regions in eastern Ukraine.
Western leaders responded with
moves to impose new sanctions on
Russia while Germany halted approval
of Russia’s new Nord Stream 2 gas pipe-
line. That raised hopes that Russian
aggression may be contained, helping
global stockmarkets to claw back heavy
losses and leading to a slight easing of
oil prices, which were trading up 1.5 per
cent at $96.83 last night.
However, Germany’s moves against
Nord Stream 2 raised further concerns
over Russian gas supplies to Europe,
triggering a fresh rally in European
prices, with UK benchmark gas prices
rising by 10 per cent to more than 190p
a therm.
The rising commodity prices threat-
en further painful inflation for consum-
ers who are facing record energy bill
increases from April and paying all-
time-high prices for petrol.
Britain gets very little gas directly
from Russia but is linked by gas pipe-

commoditiescommodities currenciescurrencies

$

1.400

1.350

1.300

1.250

$

£/$

$1.3598 (-0.0014)

100

90

80

70

Dow Jones

33,596.61 (-482.57)

38,000

36,000

34,000

32,000

1.225

1.200

1.175

1.150

£/€

€1.1989 (-0.0009) ¤

world markets (Change on the day)

Gold

$1,903.81 (+7.11) $

2,000

1,800

1,600

1,400

Brent crude (6pm)

$97.26 (+1.94)

FTSE 100

7,494.21 (+9.88)

Jan 24 Feb 1 9 17 Jan 24 Feb 1 9 17 Jan 24 Feb 1 9 17 Jan 24 Feb 1 9 17 Jan 24 Feb 1 9 17 Jan 24 Feb 1 9 17

8,000

7,500

7,000

6,500

One of the Bank of England’s most
hawkish rate-setters has played down
the prospect of rapid interest rate rises,
saying that they will be nowhere near
the levels seen before the financial
crisis in 2008.
Sir Dave Ramsden, one of the four
members of the monetary policy com-
mittee (MPC) to vote for rates to go up
by 0.5 percentage points in February,
said rate rises will be modest as he ques-
tioned the path laid out by the futures
market, which is predicting a rise to
almost 2 per cent within two years.

Interest rates won’t hit pre-financial crisis levels, Bank hawk claims

Arthi Nachiappan,
Economics Correspondent

He said “further modest tightening” of

monetary policy will be needed in the

coming months, but added: “The word

modest is significant, I do not envisage

the rate rising to anything like its

pre-2007 level of 5 per cent or above, let

alone the kind of levels we saw before

the MPC was formed in 1997.”

Interest rates rose to almost 15 per

cent in the decade before the task of set-

ting monetary policy was handed to the

Bank by Gordon Brown, the chancellor

at the time. Rates fell to 5 per cent in the

years before the global financial crisis.

The base rate was then cut to 0.5 per

cent and did not rise by much, even

after the recovery. It was cut to 0.1 per

cent at the start of the pandemic and

now stands at 0.5 per cent.

Ramsden, who left the Treasury to

join the MPC in 2017, told the National

Farmers’ Union conference in Birming-

ham that he voted for a 0.5-point rise at

the MPC’s last meeting because he was

concerned that the lack of spare capa-

city in the jobs market and the widening

of price pressures across the economy

would cause inflation.

“As I have seen those risks grow, and

to ensure they don’t become too

embedded, I have been voting for some

front-loaded tightening in monetary

policy since last September,” he said.

Ramsden and Michael Saunders

were a minority when they voted to

wind down the Bank’s asset purchase

programme, which is used to stimulate

the economy, in September last year.

The pair were also the only two

members to vote for a rate rise of 0.15

points to 0.25 per cent in November,

before the Omicron variant took hold.

The Bank became the first of the

world’s big central banks to increase the

cost of borrowing in December, when

the committee voted to raise interest

rates to 0.25 per cent. Members voted in

February to raise rates by a further

0.25 percentage points.

Ramsden said that growth in the

economy is facing the ongoing impacts

of three major shocks: Brexit, Covid

and energy prices. Monetary policy is

not effective against a global rise in

wholesale energy prices because there

is a lag in its impact, but it can ensure

that “current increases in prices do not

feed through to further rounds of price

increases in the future”, he said.

To avoid this, businesses must recog-

nise that the Bank will not “tolerate per-

sistent overshoots” in its inflation tar-

get and avoid factoring in high expecta-

tions of inflation when setting their

prices and wages, Ramsden added.

Inflation reached a 30-year high of

5.5 per cent in January and is expected

to peak at more than 7 per cent in April.

Sanctions on Russia could double gas prices

Inflation

fears as oil

nears $100

lines to Europe, which gets about a

third of its gas from Russia. UK and

European prices are closely correlated.

Responding to Germany’s decision to

halt Nord Stream 2 certification, Dmit-

ry Medvedev, the former Russian presi-

dent, tweeted: “Well. Welcome to the

brave new world where Europeans are

very soon going to pay €2,000 for 1,000

cubic metres of natural gas!”

That would be more than double

current prices and equate to 19 per cent

higher than the record prices set in late

December, analysts said.

Christopher Louney, commodity

strategist at RBC Capital Markets, said:

“While the White House does not have

the intention to directly sanction Rus-

sian energy exports given concerns

about exacerbating Europe’s already

precarious energy situation, energy

exports are still at risk, gas included,

either because Russia chooses to weap-

onise its energy exports in retaliation

against other sanctions, or because

some transportation capacity is shut in

due to kinetic conflict.”

Jamie Maddock, equity research

analyst at Quilter Cheviot, said it was

“likely just a matter of time” before

$100 a barrel was breached.

Douglas McWilliams, deputy chair-

man of the Centre for Economics and

Business Research, said “an effective

Continued on page 36, col 2

Sharp point The Scalpel office tower in the City of London is to be sold to Ho Bee

Land, a Singaporean investor, for about £820 million, the Financial Times reports

Glaxo hails

Haleon as a

new spin-off

Pharmaceutical giant GlaxoSmith-

Kline has unveiled “Haleon” as the new

name for its consumer healthcare divi-

sion, which is set to be spun off and list-

ed in London as a top-20 member of the

FTSE 100 in the middle of this year.

The business, whose brands include

Sensodyne toothpaste and Panadol

painkillers, was last month revealed to

have rejected a £50 billion takeover

approach from Unilever.

GSK said the new moniker derives

from “Hale”, meaning in good health,

and “Leon”, which it claimed was asso-

ciated with strength, and declared it

was to be pronounced “Hay-Lee-On”.

The division’s current chief execu-

tive, Brian McNamara, has been named

as chief executive designate, while

former Tesco boss Sir Dave Lewis has

been appointed chairman. A new cam-

pus in Weybridge, Surrey, expected to

open at the end of 2024, will be its new

corporate headquarters as well as a

centre for research and development.

GSK is due to set out plans for the

separation of the division, including

financial details and growth ambitions,

at a capital markets day next week.

It unveiled separate targets this

month for its remaining vaccines and

medicines business, New GSK, which it

expects to deliver sales growth of

between 5 per cent and 7 per cent this

year and adjusted operating profit of

between 12 per cent and 14 per cent.

Glaxo is one of the world’s largest

drugs groups, with 94,000 employees.

It has come under pressure from activ-

ist investors including Elliott Advisors

after years of underperformance.

Dame Emma Walmsley, chief

executive, said: “Haleon has enormous

potential to improve health and wellbe-

ing across the world... and through

listing will unlock significant value for

GSK shareholders.”

Emma Powell

ALAMY