Bernanke ready to act on economy

27 August 2010 Last updated at 18:34 ET

Federal Reserve chairman Ben Bernanke has laid out four “unconventional” policy options to boost the US economy.
Top of the list is more “quantitative easing” - mass purchases of debt.
Speaking to fellow central bankers at the annual Jackson Hole symposium in Wyoming he said the recovery had slowed to “a pace somewhat weaker” than forecast.
Hours earlier economic growth for April to June was revised to an annualised rate of 1.6%, down from 2.4%.
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America’s top banker says the country’s biggest economic problem is confidence. But is he doing enough to inspire it? ”

End Quote Mark Mardell BBC North America editor

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Questor share tip: RSA Insurance is buy for income

Questor says BUY
The company provides property, vehicle, liability and specialist insurance products worldwide.
Pre-tax profit came in at £302m in the six months to June 30, up from £301m last year. Net written premiums rose 9pc to £3.8bn, driven by acquisitions in Sweden, Oman and Canada.
The growth in new premiums was higher than expected – the market had pencilled in growth of just 5pc. This also represented an acceleration of growth from the first quarter, which stood at about 5pc.
Also, the group’s so-called combined ratio still hit 94.8pc, deteriorating from 93.5pc last year.
The combined ratio is a profitability metric for an insurance company and is essentially a measure of premiums coming into the company minus insurance claims paid out.
Any reading that comes in below 100pc means the company is taking in more premiums than it is paying out – hence it is profitable.
The group increased the interim dividend by 7pc to 3.12p and this will be paid on November 26. The company’s stated dividend policy remains to increase payments by more than the rate of inflation.
The company’s business in emerging markets is growing from a low base. Its international business continued to drive the group. Premiums are up by 7pc to £1.9bn and the combined operating ratio at this business was an excellent 89.3pc. Europe, however, still remains a tough market.
Of course, as with any insurer, profits can be hit by major catastrophic events such as the floods in Pakistan.
RSA’s shares are trading on a December 2010 earnings multiple of 10.2 times, falling to 9.4 next year.
First recommended at 117.6p in June, they have risen 14pc, compared with a market up 6pc. Investors who bought on the recommendation would have locked in a 7.3pc yield but the shares are still yielding 6.4pc. Buy for the income.
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Savers hit as inflation spikes

A surprise record jump in inflation last month will erode the real value of
deposits for millions of Briton’s beleaguered savers, experts have warned,
as mortgage borrowers fear that the Bank of England will respond by
increasing interest rates.

The consumer price index (CPI), the official measure of inflation, jumped to
3.7 per cent last month, from 3.4 per cent in March. The 17-month high was
fuelled by the rising price of women’s clothing, food and the excise duty
increases on tobacco.

Meanwhile the retail price index (RPI), which is more commonly used by
employers, banks and building societies, leapt to 5.3 per cent, from 4.4 per
cent in March, the biggest monthly increase since 1991.

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‘Astronomical’ rise in rail fares

By Brian Milligan
Business reporter, BBC News

South West Trains says only 8% of its services have been redesignated

Some of the UK’s biggest train operators are being accused of “astronomical” fare rises, as a result of extending peak-time hours.

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House price growth hits three-year high

House price growth has broken the double-digit barrier for the first time in almost three years, suggesting that confidence in the market has returned.
Nationwide said that the 10.5 per cent growth in average annual prices was the highest since June 2007.
Property values grew by 1 per cent in April to an average of £167,802, bringing them to within 10 per cent of their peak in October 2007.
Prices have risen by 6.7 per cent during the life of the last Parliament — half the rate of inflation over the period, which reached 13.5 per cent on the consumer price index.

Nationwide attributed the strong rebound in the past year to low levels of stock on the market and relatively high demand, rather than to high levels of sales.
It warned, though, that the upward trend was likely to stabilise over the coming months as more sellers put their homes on the market.
Martin Gahbauer, chief economist at Nationwide, said: “Given the very strong performance of house prices from May 2009 onwards it will take monthly increases in excess of 1 per cent for the annual rate of inflation to be maintained in double digits going forward.”
The level of the monthly rise, based on seasonally adjusted figures, was partly due to April 2009 being one of the weakest months of last year, Nationwide said.
The quarterly rate of growth, regarded as a smoother indicator of house price trends, fell further from 1.5 per cent in March to 1.1 per cent last month as a result of the 1 per cent decline in prices in February.
David Smith, senior partner at Carter Jonas, the property consultancy, said: “The property market may have edged into double-digit territory but it’s important to put this symbolic price point into context. The price rises of the past year have been driven primarily by a shortage of stock rather than strong demand.
“They are also being supported by low interest rates, which will only remain at the current level for so long, and possibly not as long as some think given rising inflation.
“Once interest rates rise the pace of price growth will become more subdued and there may be an adjustment in the second half of the year.
“Many buyers are currently sitting on their hands, waiting to see how the general election and a second potential Budget pan out before they commit to transact.”
Nationwide said that the main source of demand since the middle of last year were homebuyers taking out mortgages, rather than cash buyers, despite the ongoing constraints to mortgage availability for those with small deposits.
The proportion of cash transactions averaged 43 per cent in 2008, when mortgages were most scarce, against 37 per cent in 2007. “This suggests that cash buyers did make some contribution to clearing the excess stock of housing on the market during the period in which mortgage finance was least available,” Mr Gahbauer said.
“The importance of cash buyers in the market started to decline at exactly the same time as house prices began the strong rebound that has lasted up until the present day.”
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Drivers face green tax rises twice rate of inflation

By
Daily Mail Reporter
Last updated at 11:56 AM on 01st April 2010

Motorists buying the most polluting cars will today be hit with a £950 top rate of road tax.
The owners of more than six million vehicles already on the road also face tax rises of more than twice the rate of inflation.
The Vehicle Excise Duty rates, which were first announced in 2008 but come into force today, are designed to reflect car engine emissions.
Top rate: Rolls Royce owners will pay £950
Some 13 emission bands are in place, with the owners of the highest polluting vehicles paying the most road tax.
An additional one-off showroom tax will also apply to anyone buying a car in the most polluting bands. Nine of the 13 categories will have to pay this tax.
Every new car built by Aston Martin, Bentley and Rolls-Royce will face the £950 tax as will most new Jaguars, some Range Rovers and the Vauxhall Insignia 2.8. At the other end of the market, cars with low emissions including the Audi A3 1.6 TDI and the Audi 316d will pay no tax in the first year.
For the most polluting cars, the first-year tax rate equates to a £545 increase for the first year and a £30 increase for each subsequent year.
Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, said: ‘We are disappointed the Government didn’t take the opportunity in last week’s Budget to defer the introduction of the first-year rate or the increase in standard rates.
‘Environmental taxes need to be clear and consistent so motorists can be confident they will reap the benefits from their decision.’
Paul Walters, of the AA, said: ‘The problem with any tax is once it is introduced we have crossed a threshold. It is open then for any Chancellor to increase it.’

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NS&I Index-Linked Savings: Q&A

Published: 1:48PM GMT 15 Mar 2010

What are NS&I Index-linked Savings Certificates?

NS&I Index-linked Savings Certificates are also known as Inflation-Beating
Savings and are designed to give savers a guaranteed tax-free rate of
return, higher than the rate of inflation measured by the Retail Prices
Index (RPI), if held for the full certificate term.

The certificates were launched in 1975 and were initially available
exclusively to pensioners as a way of protecting their savings against high
inflation. In 1981 the exclusivity of the certificates was dropped and they
were made available to all savers.

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Inflation set to soar above 3%

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By
Daily Mail Reporter
Last updated at 9:55 AM on 16th February 2010

The reversal in the VAT reduction last month saw inflation leap to 3.5 per cent in January - its highest level since November 2008.The Office for National Statistics (ONS) said the rise in Consumer Prices Index (CPI) inflation came as the cost of alcohol, tobacco, hotels and restaurants soared after the Government raised VAT tax back up to 17.5 per cent.The 14-month CPI high triggers an open letter from the Governor of the Bank of England Mervyn King to the Chancellor to explain why inflation is more than one per cent above the two per cent target.
The Bank Of England’s reversal in the VAT reduction last month saw inflation leap to 3.5 per cent in January - its highest level in 14 monthsMr King has already indicated he will have to write to Alistair
Darling explaining why inflation has risen by so much again, having already surged by a record rate in
December.
The central bank boss must write to the Chancellor when CPI hits more than one per cent above or below the two per cent target.

Today’s CPI hike comes after an all-time record rise in the rate of
inflation in December, when inflation surged to 2.9 per cent from 1.9
per cent in November.
But the January increase was in line with expectations and the Bank’s own forecast.
The Bank indicated last week that it expected CPI to peak at 3.5 per
cent before falling back below two per cent later this year.
January’s VAT rise was the biggest factor in forcing CPI to 3.5 per cent, according to the ONS.
The Government reduced VAT to 15 per cent on a temporary basis until
last month in a bid to boost consumer spending and ease the recession,
but its reversal back to 17.5 per cent was always expected to have an
impact on inflation.
Letter: Mervyn King, the Governor of the Bank of England, will now write to the Chancellor explaining why inflation has risenThe ONS said that, as a result of VAT, the monthly change in the
all-item CPI index fell by just 0.2 per cent between December and
January - traditionally a time when prices fall.
It was the smallest ever decline since records began in 1996.
Higher fuel and transport costs also sent CPI up, with annual
transport inflation, including the cost of cars, reaching a record 11
per cent.
Last month’s adverse weather also impacted the cost of certain
seasonal vegetable prices, with cauliflowers rising by the highest
amount since at least 1996 and the cost of carrots doubling.
Its figures also showed that the headline rate of Retail Prices
Index (RPI) inflation, which includes the cost of mortgages and
housing, also rocketed in January, to 3.7 per cent from 2.4 per cent.
The ONS said it would publish more details on the impact of VAT on inflation on April 20.
Economists expect CPI to start falling swiftly from the second quarter onwards.
The Bank’s quarterly forecast last week signalled that it would fall
due to the economic slack created by the recession, even with rates
kept at the all time historic low of 0.5 per cent and with its
£200billion Quantitative Easing programme left in place.
Minutes due tomorrow of the Bank’s last rates meeting could show a
split over the decision to pause QE, given the weak recovery in the
economy.
Six quarters of decline came to an end in the final three months of
2009 with an upturn of a meagre 0.1 and the Bank has since reduced its
growth forecasts.

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£22,000 a year to put a child in nursery as fees rocket

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By
Laura Clark
Last updated at 7:58 AM on 10th February 2010

Parents are spending up to £22,000 a year for the best nursery places. (Posed by model)
Working parents are paying up to £22,000 a year for childcare as fees rise faster than inflation, it is revealed today.
Charges for nurseries and childminders in the country’s most expensive areas are now on a par with the cost of prestigious boarding schools.
A survey by the Daycare Trust found that mothers are being forced back to work early by the recession only to find that childcare costs swallow up a ‘ significant proportion’ of their income. Its research revealed that childcare fees have risen faster than inflation for the eighth year in a row. The
cost of a nursery place for a two-year-old has risen 5.1 per cent -
almost twice the rate of inflation - while childminders’ charges for a
two-year-old have increased by 9.2 per cent. The average cost of 25 hours’ nursery care for a child under
the age of two for a week is £88, rising to £109 in London and £108 in
the South East. It means parents in England spend on average £4,576 a
year for 25 hours’ care a week. For a full-time place, requiring 50 hours’ care, parents can expect to pay £176 per week - or £9,152 a year. This is a ’significant’ slice of average gross weekly earnings of £489, the report said.
But some nurseries in the survey charged more than double these rates - up to £22,100.
This compares with average annual day school fees of £10,296 and boarding fees of £23,244.
The average fee for childminders in England is £83 for 25 hours’ care a week for a child under two and £103 for older children.
But the report authors found that growing numbers of parents are accepting the charges as going back to work becomes a ‘financial necessity’ in the recession.
That in turn is leading to a lack of available childcare places in some areas as increasing demand outstrips supply.
Alison Garnham, chief executive of the Daycare Trust, said: ‘Over the last year, families across the UK have been hit hard by the impact of the recession, with parents facing the strain of losing jobs, having their hours cut back, or facing pay cuts - all of which is compounded further by childcare costs shooting up.’
The Trust wants poorer families to be able to claim 100 per cent of their childcare costs through tax credits - up from the current 80 per cent limit.

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Inflation: savers lose out as CPI rises to 2.9pc

By Emma Wall

Published: 11:08AM GMT 19 Jan 2010

Basic rate tax payers will now need an account paying at least 3.63pc to gain
benefit in real terms from their savings, increasing to 4.84pc for higher
rate tax payers

The increase in rate of inflation will deal a blow to savers currently
receiving an average of just 0.75pc interest on their no notice accounts.
But there are currently no variable rate accounts paying an interest rate of
more than 3.63pc- only inflation beating by 0.73 percentage points.

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