Supermarket price wars drive down UK inflation rate
Analysts: less pressure to raise interest rates
Earlier:
Argentinian president vows not to default after court defeat
Argentina's options (none good)
Shares in Shire jump on takeover talk
EU car sales rise for ninth month
2.08pm BST
The Bank of England's annual report has landed, giving an insight into how the UK central bank operated last year.
And there are some eye-catching facts.
It is the Banks policy to relocate those appointed to senior positions as necessary, and to incur the costs of doing so. In line with this policy, the Bank relocated Mr Carney and his family from Ottawa to London. Procurement decisions in that process were taken by the Bank.
The final cost of the relocation was £102,816, of which £10,678 was related to 2012/13. Under HMRC rules, these costs, with the exception of the first £16,106, are also subject to tax, and gave rise to a tax liability borne by the Bank of £95,846.
Did the BoE charter a plane specially? Carney relocation cost £102,816 pic.twitter.com/HF4B2YcS30
2.04pm BST
At 2.1%, annual inflation in America's economy in May was a fair lick higher than in the UK, where prices rose by up just 1.5%, of course.
That's pretty unusual - the FT's James Mackintosh reckons it's only the third time since the financial crisis was raging at its peak.
US inflation higher than UK in May for only third month since Lehman collapsed in 2008
1.40pm BST
Instant reaction to the US inflation data:
US inflation picking up, headline 2.1% and core 2% annual rate in May, both above forecsats.
The Fed-to-eye-the-exit meme is going to gather steam.
Real wages (in other words, wages adjusted for inflation) have dropped 0.1% over the last 12 months http://t.co/hYNY96fhSH
1.37pm BST
Just in -- US inflation rate rose by more than expected last month, at the fastest annual rate since October 2012.
The US consumer prices index rose by 2.1% annually in May, with prices up by 0.4% compared with April alone.
Take a bow those of you who didn't freak out over the disinflation of 2013.
1.19pm BST
Supermarket chain Morrisons has just announced that it is proposing to make 2,600 workers redundant, as part of a management restructuring.
As my colleague Sarah Butler reported two weeks ago, Morrisons has been planning a major management restructuring following "trials of three possible slimmed-down management structures in around seven of its new stores".
Morrisons say they're simplifying management structure because some stores currently have seven tiers between shop floor & store manager
Morrisons laying off 2600 staff but creating 4,000 jobs elsewhere. "Displaced colleagues" will be offered these new roles.
1.04pm BST
Goldman Sachs sees a "material risk - circa 30-40%" that UK inflation will fall BELOW 1% by the end of this year.
12.35pm BST
If Argentina defaults again, the impact on other emerging markets will probably be limited, reckons analysts at Nordea:
Nordea: Contagion from another default by Argentina to other emerging markets will likely be close to non-existent
"This decision could also have major implications for other heavily indebted countries like Greece, Ireland and Jamaica. It points to the urgent need for a fair and transparent workout mechanism for international debt, as well as for countries like the US and UK to bring forward legislation to stop predatory vulture funds profiteering from the misery of countries in debt crisis.
11.49am BST
Back to the threat of Argentina defaulting again, after losing its appeal against honouring bonds which it defaulted on in 2001 (full details early in the blog).
This chart shows how its bonds have become much riskier -- it measures the yield, or interest rate, on 10-year Argentinian bonds. Yield rises when the price of a bond falls:
Yield on Argentina's 2017 global bond jumps to 16%. That's a lot, but it was 20% earlier this year: pic.twitter.com/BTx0ObtIAI
11.31am BST
Newsnight's Duncan Weldon has been digging into the inflation data for some details:
Inflation - ONS reports upwards pressure from computer games & 'new world' wine. Downwards pressure from air fares & women's clothes.
11.21am BST
Meanwhile in Germany, investors aren't feeling as cheerful as their triumphant World Cup footballers.
The ZEW institute's monthly assessment of investor confidence slipped this month to an 18-month low. It came in at just 29.8 points, down from 33.1 in May.
#Germany Investor Confidence Index ZEW drops unexpectedly in June to 29.8 (prev 33.1, exp 35.2), despite #ECB measures. Or because of? #euro
11.10am BST
Catherine McKinnell MP, Labours Shadow Treasury Minister, points out that wage rises have lagged inflation for most of the last four years.
The fall in the rate of inflation is welcome, yet most people are still feeling the squeeze.
Wages after inflation have now fallen by over £1,600 a year under David Cameron and the link between the wealth of the nation and family finances is broken. A huge turnaround would be needed to ensure working people arent worse off than when this Tory-led government came to office.
11.03am BST
There is a risk that Iraq conflict drives UK inflation rates higher, making it harder for households to benefit from wage rises
Rob Harbron, senior economist at the Centre for Economic and Business Research, explains:
The price of Brent crude oil has climbed markedly in the past ten days, rising from a low of $108 a barrel in early June to $113 a barrel yesterday. This could increase further in the coming days and weeks, as political crisis deepens in Iraq the fear is that oil supply may be affected by conflict in the region.
In addition, Ukraines gas supplies from Russia were cut off yesterday, a move that was followed by a 6% increase in UK gas wholesale prices.
10.56am BST
Ian Stewart, chief economist at Deloitte, is cheered by today's inflation data:
The UK is experiencing low inflation and strong growth, the holy grail for economic policymakers. Inflation has almost halved from last years peak and growth expectations for this year have almost doubled.
We are in the sweet spot of the economic cycle.
10.43am BST
The pound has fallen back a little since the UK inflation data came out, as traders calculate that there's less pressure to raise rates.
It has lost around 0.2 cents against the US dollar, to $1.6963, away from the near five-year high of $1.70 scaled yesterday.
10.41am BST
Ben Chu of the Independent flags up that the Bank of England has, once again, proved a little inaccurate in the forecasting department:
The Bank of England's near-term inflation forecast from May is considerable miss: pic.twitter.com/G0GAFnfDq9
10.36am BST
This surprise drop in UK inflation to just 1.5% is another twist in the debate on when UK interest rates should start to rise.
Last Thursday, governor Mark Carney warned that rates could rise sooner than the markets expected -- that doesn't look quite as likely now.
Drop in UK inflation to 1.5%, lowest since Oct 2009, helps ease cost of living problem & should defuse some of recent hawkish rate comments.
There is pressure on Mark Carney and the rest of the MPC to hike rates on the back of growth and housing market concerns, but, given their central mandate of price stability, there is little cause to alter the current policy as it stands.
I was vocal in not having rates hiked when inflation peaked to 5.5% in 2011 and growth was low, as I felt it could harm the recovery. I stand by the knowledge that the UK economy has enough spare capacity and slack in labour markets to not need to tighten policy just yet
We suspect that 1.5% will mark the low point for consumer price inflation, but it looks well placed to remain below 2.0% for the rest of 2014, and very possibly beyond.
The inflation data will go some way to abating the aggressive calls for a rate hike from the Bank of England this year, especially so following Carneys hawkish comments last week and other more recent comments from MPC members since.
We could well see one or two votes for a rate hike at the last meeting when the MPC minutes are released tomorrow the BOE Governor may have been prepping the market for such a scenario, but this recent inflation data will put a small dent in expectations for a rate hike this year.
10.28am BST
London house prices rose 18.7% in past year. Biggest annual increase since mid-2007. British regions since '02: pic.twitter.com/rRyGlArw3f
10.14am BST
The Office for National Statistics also reported that UK house prices jumped by 9.9% in April; the biggest rise since June 2010.
And in London, prices jumped by over 18%.
10.05am BST
Good news that inflation down to 1.5%, lowest for 5 years. Another sign that our long term economic plan is working, but lots more to do
10.03am BST
Bang on queue, here's that hashtag:
Good news that inflation is at its lowest for 5 years - it means more stability and financial security for everyone. #LongTermEconomicPlan
9.57am BST
There must be an election coming.... Because over at the Treasury, there's a scramble to welcome the news that UK inflation fell to 1.5% in May.
Here's the official line from a Treasury Spokesperson, crediting David Cameron's favourite hashtag, the #longtermeconomicplan
Inflation has fallen to its lowest level since October 2009 and is now well below a third of its peak in September 2011. Lower inflation and rising job numbers show that the governments long term plan is working and Britain is coming back.
But the job is not done, which is why we must continue to work through that plan.
"As a result of our role in Government, the Liberal Democrats have created the right climate for the recovery and the country is now getting back on the front foot.
Todays inflation figures add to a developing pattern of low inflation, strengthening growth and high levels of job creation.
9.47am BST
Britain's supermarket wars have played a big role in driving the UK inflation rate down to 1.5% last month.
The ONS reports that 12-month inflation rate for food & non-alcoholic beverages is currently at its lowest level for over nine years with prices falling by 0.6% compared with a year ago.
9.38am BST
Confirmation that UK inflation hasn't been this low since the end of 2009:
9.36am BST
The Office for National Statistics says that the drop in inflation was primarily due to lower transport services costs, notably air fares, in May compared to a year ago.
Other large downward effects came from the food & non-alcoholic drinks and clothing sectors.
9.32am BST
Just in: the UK inflation rate has fallen to just 1.5% in May, down from 1.8% in April, and the lowest reading since October 2009.
That's much lower than expected -- economists had expected a reading of 1.7%.
9.26am BST
Nearly time for the UK inflation data....
UK inflation figures are due at 9:30 am main interest is in the input prices and how fast house prices are now rising #CPI #RPI
9.25am BST
The oil price has also eased a little today, with the cost of a barrel of Brent crude dropping by half a dollar to around $112.50.
That follows the news that a small number of US troops are being sent back into Iraq.
"We are just very vigilant in Iraq. Non-essential production people have left but operations continue."
9.17am BST
After some nervous days, European stock markets have risen this morning as concerns over geopolitics ease, a little.
And the takeover talk swirling around Shire is helping it stick to the top of the leaderboard in the City.
9.04am BST
Associated Press has a bit more detail about the unpalatable options on Argentina's platter in its battle with holdout bondholders:
Refusing to comply was "the best option" among a series of grim alternatives that Cleary, Gottlieb, the U.S. law firm representing Argentina in Washington, presented to Fernandez ahead of the Supreme Court decision.
That guidance suggested Argentina should default on all its debts before negotiating in order to gain more leverage.
8.50am BST
Europe's car industry has continued its long, slow, recovery from the eurozone crisis, with sales rising for the ninth month running.
Industry body ACEA reports that registrations rose by 4.5% year-on-year in May -- continuing a record that dates back to last September.
8.36am BST
Just under an hour until we get the latest UK inflation data, for May.
City analysts predict that the consumer prices index slipped a little, to +1.7% annually. That's partly due to supermarket discounting, as Katie Allen's preview explains:
8.24am BST
City traders are also cheering Whitbread, pushing shares in the hotels, restaurants and coffee bar chain up by 3.5%.
Whitbread reported a 9.5% growth in like-for-like sales at its Premier Inn hotels over the last three months, thanks to:
"a buoyant hotel market driven by continuing growth in London and clearer signs of economic recovery in the UK regions.
8.13am BST
In the City, shares in UK pharmaceutical firm Shire have jumped 3.75% in early trading, after Reuters reported it has hired bankers from Citi to handle takeover approaches.
8.07am BST
Argentina appears to have limited options, despite president Fernandez's defiant words overnight. And they all look pretty unappealing.
The vulture funds who won their case against Argentina have claimed that president Fernandez has no choice but to negotiate.
"The time has come for Argentina to enter into good-faith negotiations with holdout bondholders.
"Argentina has expressed a desire to be permitted to re-enter financial markets around the world. The only way that it can do so is by coming to terms with its existing creditors."
Argentina could win a delay of a few weeks by asking for a rehearing, but they are almost never granted.
Bowing to the US courts would force Ms Fernández to betray a pillar of the government that she and her late husband and predecessor, Nestor Kirchner, have led since he won the presidency in 2003: that Argentina must maintain its sovereignty and economic independence at any cost.
7.34am BST
Argentinian president Cristina Fernandez took to the airwaves overnight to insist that her country will not default on its payments to bondholders following yesterday's defeat in the US courts.
"We want to fulfil and honour our debt and we will do that ... I ordered the economy ministry to set up all the tools needed to make the payment to those who trusted in Argentina."
RT @AP: BREAKING: Argentine leader says she won't honor $1.3 billion debt ruling despite US Supreme Court loss
Argentina has shown a more than clear will to pay, but there is a difference between negotiation and extortion.
Its our obligation to take responsibility for paying our creditors, but not to become the victims of extortion by speculators
7.22am BST
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Three events in focus today.
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