The Times - UK (2022-01-13)

the times | Thursday January 13 2022 2GM 37

Business

Patrick Hosking Financial Editor

The creation of an official digital cur-
rency in Britain could increase the risk
of a run on the banks in an economic
downturn, an influential House of
Lords committee has found.
The committee, whose members
include Lord King of Lothbury, the
former Bank of England governor, ex-
pressed serious reservations about the
introduction of a central bank digital
currency, or CBDC, dubbed “Britcoin”
by Rishi Sunak, the chancellor.
The Bank has overstated the benefits
of such a currency, the report by the
Lords’ economic affairs committee
found, while the risks are considerable.
It concluded that there was “no convin-
cing case” for Britcoin, while potential
dangers included the risk of bank runs,
privacy issues and the possibility of
making the UK vulnerable to attack by
hostile governments.
The Bank and the Treasury are con-
ducting a formal consultation into a
digital currency this year after a report
from the Bank last year laid out seven
potential benefits.
These included making the pay-
ments system more resilient, speeding
up payments and providing a better,
state-backed alternative to digital cur-
rencies linked to the pound than might
otherwise be developed by the private
sector.
They envisaged a digital currency
that would sit alongside cash and bank
deposits. Pegged to sterling, it could be
used to make everyday payments.
Lord Forsyth of Drumlean, chair-
man of the committee, said that such a

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Inflation hit multi-decade highs in the
United States last month as policy-
makers scrambled to curb surging
prices in the world’s largest economy.
Consumer prices rose in the US by
7 per cent on an annual basis in Decem-
ber, the fastest growth since June 1982,
and increased by 0.5 per cent on the
previous month, according to official

Federal Reserve’s fight against inflation ‘most important task’

Callum Jones
US Business Correspondent

data. Supply constraints and robust de-

mand drove inflation as food bills, used

car prices and rent continued to climb.

The US Federal Reserve aims to

curtail inflation by cutting back its vast

support for the American recovery. The

central bank is expected to start raising

interest rates from March. In a Senate

confirmation hearing yesterday, Lael

Brainard, President Biden’s nomination

for deputy head of the Fed, said fighting

inflation was its “most important task”

and that “working people around the

country are concerned about how far

their paycheques will go”.

Jerome Powell, the Fed chairman,

has also emphasised the need to focus

on the economy this week, and said that

central bank officials must be humble

in the face of a threat that has persisted

for longer than they first expected.

The annual consumer prices index

reading was the highest in four decades.

Its core equivalent, which strips out

volatile food and energy costs, rose by

5.5 per cent on an annual basis in De-

cember, its highest since February 1991.

Officials at the Fed are concerned at

the impact of sustained inflation. Poli-

cymakers have accelerated plans to

wind down the central bank’s asset pur-

chase scheme, under which it had been

buying $120 billion of bonds each

month. Top Fed officials expect three

rate rises in 2022, according to gui-

dance released last month, but analysts

at Goldman Sachs are among those to

have predicted four. Jamie Dimon, boss

of JP Morgan, said he would be sur-

prised if there were not more.

Paul Ashworth at Capital Economics

called the inflation report “every bit as

bad as we expected”. He said: “Reports

of empty grocery store shelves in the

northeast, caused by Omicron staff ab-

senteeism and the disruption from win-

ter storms, points to renewed upward

pressure on food prices.”

Peers condemn plan to create UK digital currency

Britcoin ‘risk

to stability

of the banks’

currency “would have far-reaching

consequences for households, busi-

nesses and the monetary system”.

He added: “We found the potential

benefits of a digital pound, as set out by

the Bank of England, to be overstated

or achievable through less risky alter-

natives”.

He said that the Bank and the

Treasury were “barking up the wrong

tree” if they envisaged Britcoin “as a

defence mechanism” against rival

cryptocurrencies proposed by giant

technology companies. It was better

simply to regulate them, he said.

Facebook is one of the leaders in

preparations for so-called stablecoins

— digital currencies operating on a

blockchain platform pegged to tradi-

tional currencies such as the dollar or

the pound.

The report, Central Bank Digital

Currencies: A Solution in Search of a

Problem?, is the second time the com-

mittee has questioned Bank policy. Last

July it expressed serious doubts about

quantitative easing — the stimulus

policy of electronically creating money

and using it to buy government bonds

— calling it “a dangerous addiction”.

In a list of potential drawbacks to a

digital currency, the committee said

there was a danger that in periods of

financial uncertainty, ordinary deposi-

tors would convert conventional

pounds into their digital equivalents to

protect against possible bank failures,

increasing the pressure on them.

“Without safeguards, such as limits

on the amount of CBDCs individuals

can hold, financial instability could be

Continued on page 40, col 4

HECTOR AMEZCUA/THE SACRAMENTO BEE/AP

Christmas sales boost for big retailers

Tom Howard

Three of Britain’s biggest retailers have

increased their annual profit forecasts

after making more money over Christ-

mas than they had expected.

J Sainsbury, Britain’s second largest

supermarket chain, JD Sports, the high

street seller of trainers and tracksuits,

and Dunelm, the homewares retailer,

all said that this year’s profits would

surpass expectations.

Sainsbury’s benefited from the threat

of Omicron, which led people to eat and

drink more at home. It sold more cham-

pagne and sparkling wine than at any

Christmas before, while its Taste the

Difference line performed strongly.

Sainsbury’s bosses now expect profits

for its present financial year to March

of £720 million, or £60 million more

than the City had been predicting.

Dunelm said that sales of furniture,

especially sofas and chairs, had proved

popular. Sales between October and

December rose by 13 per cent year-on-

year to £407 million. The margin on

sales was also healthier, up 160 basis

points compared with the same three-

month period in 2020.

It was able to sell more of its seasonal

ranges at full price and had passed on

price increases to customers “where

appropriate”. Profits for the year to end

of June would be “materially ahead of

market expectations”.

Before the update, analysts had

pencilled in an annual pre-tax profit of

about £181 million. Now they think it

that it will be more like £210 million.

JD Sports said that it had experienced

no drop-off in sales.

The “sustained positive nature of

consumer demand” meant that JD was

likely to turn a profit of at least £875 mil-

lion in the financial year, which ends in

June, more than double what it made

before the coronavirus outbreak began.

Before yesterday, its guidance had been

for £810 million of profit.

Sainsbury’s shares rose 8¾p, or 3.1 per

cent, to 288p and Dunelm put on 69p,

or 5.2 per cent, to close at £14.09.

However, JD Sports, whose stock hit

a record high towards the end of last

year, slipped despite its upgrade, drop-

ping by 7¼p, or 3.4 per cent, to end the

session at 211½p.

Sainsbury’s bumper food and drink sales,

page 45

Things are hotting up as

the Bank calls for action

Banks and insurers operating in Britain must act urgently

to address the risks posed by a warming climate, the

Bank of England’s Prudential Regulation Authority has

warned in a series of “Dear CEO” letters Page 43