We got inflation forecasts wrong, admits ECB after record interest rate rise
Households to save £1,000 a year under energy bills price freeze, says Liz Truss
Liz Truss vows to have shale gas flowing within six months as she lifts fracking ban
Bank of England to lend energy industry £40bn to deal with surging prices
FTSE 100 rises 0.3pc; Pound gains after energy plan
Tom Stevenson: The battered pound is sinking towards dollar parity
The European Central Bank has announced its biggest ever interest rate rise in the battle to beat inflation, as president Christine Lagarde vowed to keep hiking to stop prices spiralling out of control.
Policymakers raised all three of the key interest rates at the bank (ECB) by 0.75 percentage points on Thursday, the biggest increase since the euro's launch in 1999. It takes the deposit rate back above zero for the first time since 2011.
Ms Lagarde warned that inflation, which stood at 9.1pc in August, was "far too high" and likely to remain above the bank's 2pc target for an "extended period" of at least two years.
While Ms Lagarde insisted that policymakers would take decisions meeting by meeting, she suggested that rates would need to keep rising for "several meetings'' to bring inflation back in check.
Speaking to reporters, she said: "As we are so far away from the rate that will help us return inflation to 2pc our hikes have to be not only timely, but of a magnitude that brings us closer and more quickly towards our target."
Price rises are expected to average 8.1pc this year and 5.5pc in 2023, only falling back close to the ECB's 2pc target in 2024. The ECB also warned of a "substantial slowdown in euro area economic growth" as it cut its growth forecast to 0.9pc in 2023, from a previous prediction of 2.1pc.
However, economists said they were surprised that the ECB believed the bloc would avoid recession, although Ms Lagarde said a downside scenario where Russia completely cut off gas supplies, forcing countries to ration energy would probably trigger a period of economic decline next year.
Most economists expect the single currency bloc to fall into recession later this year.
Holger Schmieding, an economist at Berenberg bank, said: "It seems likely that, once the ECB realises the depth of the recession that we expect to unfold, it will put rate hikes on hold at some time in early 2023."
Despite Ms Lagarde's hawkish comments, the euro fell against the dollar as investors digested hawkish comments from Jerome Powell, chairman of the US Federal Reserve.
Mr Powell said the central bank would act "forthrightly, strongly" to raise interest rates in the world's biggest economy and "keep at it until the job is done".
04:12 PM
Handing over
That's all from me – thanks for following on a busy news day.
03:39 PM
Wall Street slips as Powell sticks to hawkish stance
Wall Street has slipped in early trading after a recovery in the previous session as Federal Reserve Chair Jerome Powell's hawkish comments cemented bets of another large interest rate hike later this month.
The Fed is "strongly committed" to controlling inflation but there remains hope it can be done without the "very high social costs" involved in prior inflation fights, Powell said this afternoon.
The S&P 500, Dow Jones and tech-heavy Nasdaq all rose 0.3pc.
03:19 PM
Bank of England to lend energy industry £40bn to deal with surging prices
ICYMI – The Bank of England will hand cash-starved energy companies up to £40bn of Covid-style loans as suppliers struggle to protect themselves from soaring prices.
Tom Rees has more:
Liz Truss announced a joint scheme between the Bank and the Treasury to provide emergency short-term help in an intervention that ministers hope can slash energy costs.
Surging prices mean energy providers are having to provide more capital when buying energy to effectively insure against price swings. The huge capital requirements are stretching balance sheets in the sector.
The Energy Markets Financing Scheme will help suppliers meet the “extraordinary” cash requirements they face in the wholesale gas and electricity markets, amid concerns of a cash crunch that has been compared to a "Lehman Brothers moment" for energy suppliers.
The Government said the scheme is intended as a “last resort” for suppliers and will help to reduce costs and stabilise energy markets.
03:04 PM
Fed must act 'strongly' to avoid repeat of 1980s, says Powell
The Federal Reserve must continue to act "strongly" to cool demand and contain price pressures to avoid a repeat of the inflation surge the US economy suffered in the 1970s and 1980s, Fed Chair Jerome Powell has said.
His predecessor from that era, Paul Volcker, had to take extreme measures because high inflation had become entrenched.
Speaking hot on the heels of the ECB announcement, Mr Powell said: "We need to act now forthrightly, strongly as we have been doing and we need to keep at it until the job is done to avoid... the kind of very high social costs [of the Volcker era.]"
The Fed has raised interest rates four times this year, with another huge 75 basis-point increase possible later this month.
Mr Powell has acknowledged that the aggressive campaign could cause some pain, but he has stressed repeatedly that acting now will prevent more damaging consequences down the road.
"The clock is ticking," Powell warned, adding that "history cautions strongly against prematurely loosening policy".
02:48 PM
Lagarde ends press conference
That's all from Christine Lagarde, who's wrapped up the press conference.
In summary, the ECB announced its biggest-ever interest rate rise and increased its forecasts for inflation over the coming years.
Ms Lagarde also gave a very clear indication that more interest rate rises are coming as the central bank battles to keep a lid on rising prices.
02:46 PM
How big will future interest rate rises be?
Christine Lagarde is offering less guidance on how big the future interest rate rises will be. Bear in mind, though, that she said 75 basis-point moves weren't the "norm".
Here's more:
If the data on our meeting-by-meeting exercise review suggest that we should take a high hike of our interest rates, we will do so.
It is not preset, it is not predetermined, and it will be decided on a meeting by meeting basis.
But the certainty is that we are far away from the goal. We are taking a major step today by front loading.
02:36 PM
Lagarde: We'll hike at more than two more meetings
The ECB may have claimed it was ditching forward guidance, but Christine Lagarde has been dropping some pretty unequivocal hints.
She has the ECB will probably raise interest rates at more than two more meetings, but fewer than five.
02:24 PM
ECB 'attentive' to euro's slump
Here's what Christine Lagarde had to say a little earlier about the decline in the euro:
We do not target any kind of exchange rate for the euro. But we monitor very carefully and we have noted the depreciation relative to a basket of currencies, but most importantly relative to the dollar...
We know it does have an impact on inflation, with a lagging time. It has direct and indirect effects as well and we are very attentive to those, but we do not target an exchange rate. We have not done so and will not do so.
02:20 PM
ECB says it doesn't expect a recession
One thing that's raising eyebrows is the ECB's insistence that the eurozone won't fall into a recession.
That contradicts the opinion of many economists, especially as the energy crisis gripping the continent continues to worsen heading into the winter.
Lagarde mentioned that ECB expects a rise in unemployment but no recession. Possible but not the norm judging by history. pic.twitter.com/CTyO2PSl4u
— Oliver Rakau (@OliverRakau) September 8, 2022
02:08 PM
75 basis points 'is not the norm'
Despite the gloomy outlook, Lagarde says people shouldn't get used to 75 basis-point hikes. These aren't the "norm", she adds.
But the ECB says that, given inflation, determined action had to be taken.
02:04 PM
Lagarde: Interest rate decision was unanimous
Christine Lagarde says the ECB unanimously decided to raise interest rates today.
She hints at the reasoning for the big hike as she says risks to the inflation outlook are "primarily to the upside". That means the central bank thinks things could get even worse.
01:54 PM
Abrupt end to ECB's ultra-low interest rates
FX analyst Viraj Patel points out just how rapid the ECB's reversal on interest rates has been.
⚠️ The ECB has unwound 10 years in 2 months... $EUR pic.twitter.com/PfBFzq5UJi
— Viraj Patel (@VPatelFX) September 8, 2022
01:49 PM
Christine Lagarde: Big rate rise 'frontloads' the move
Christine Lagarde says the ECB's record interest rate rise "frontloads" its response to spiralling prices.
She adds that the central bank is planning further increases in interest rates at its next meetings to dampen demand and guard against a "persistent upward shift in inflation expectations">
01:47 PM
Christine Lagarde to give press conference after ECB decision
In a few moments we'll be hearing from ECB President Christine Lagarde.
Investors will be listening intently to her comments for hints about the future direction for monetary policy.
01:36 PM
Reaction: The ECB's hand has been forced
Seema Shah, chief global strategist at Principal Global Investors, says the ECB had little choice but to raise interest rate aggressively.
The ECB has joined the 75bps club. Today’s policy rate increase, the largest in the single currency area’s history, comes despite the oncoming recession and is testament to the enormity of the inflation challenge facing the central bank.
With inflation at a record high and almost five times greater than the ECB’s 2pc target, and inflation expectations unbearably elevated, the ECB’s hand has been forced.
There may be some slight reprieve for the euro today. Yet this will likely be short-lived. While the ECB has downgraded their economic forecasts to show stagnation later this year, even this is over-optimistic.
Unlike the Fed where the recession is still a couple of quarters away, the energy crisis means that a Euro area recession is already brushing up against the ECB, likely limiting how high ECB rates can realistically rise – irrespective of the very-pressing inflation problem.
01:32 PM
Reaction: ECB had to react forcefully
Altaf Kassam at State Street Global Advisors saysthe ECB had to hit back against criticism it was acting too slowly on inflation.
The ECB joined the Fed in hiking 75bps today, moving more aggressively than markets had priced in. To us, this move seemed inevitable as the ECB strove to regain its credibility given August’s inflation surprise, with both headline and core scaling new highs, and headline staying above the US for a second month.
With core inflation more than double the ECB’s target and rising, it was impossible to argue that this inflation spike was ‘transitory’ and purely about energy.
The ECB had to respond forcefully to criticism of falling behind the curve, especially with the worry that second-round effects were starting to taking hold. This hike was also about putting a floor under the Euro, and keeping a lid on the extra imported inflation its weakness had brought.
Going forward, we expect the ECB to slow its pace of rate rises, hiking another 50bps in October and 25bps in December – yielding a policy (deposit) rate of 1.5pc by year-end.
Today’s “super hike” was less frontloading and more catching up, but should give the ECB breathing space to focus on other matters such as potentially ending Asset Purchase Programme (APP) reinvestments and activating the Transmission Protection Instrument (TPI).
As the ECB’s revised forecasts showed, 2023 is looking to be a grim year, and the central bank needs as much flexibility as possible.
01:28 PM
ECB steps up battle against inflation
Here's more on the ECB decision from our economics editor Szu Ping Chan:
The European Central Bank has announced the biggest interest rate rise since 1999 as policymakers said they would keep raising the cost of borrowing to fight inflation.
Policymakers raised all three of the ECB's key interest rates by 0.75 percentage points. The move takes the deposit rate above zero for the first time since 2011.
Inflation stood at 9.1pc in August, according to official figures, a rate that the ECB said was "far too high".
Price rises are expected to average 8.1pc this year, 5.5pc in 2023 and only fall back close to the ECB's 2pc target in 2024.
In a statement, the ECB said: "Inflation remains far too high and is likely to stay above target for an extended period. Soaring energy and food prices, demand pressures in some sectors owing to the reopening of the economy, and supply bottlenecks are still driving up inflation.
"Price pressures have continued to strengthen and broaden across the economy and inflation may rise further in the near term."
01:24 PM
Eurozone growth outlook slashed
Alongside the inflation numbers, there's also a gloomy forecast for growth.
The ECB has slashed its outlook for GDP growth to 3.1pc this year, 0.9pc in 2023 and 1.9pc in 2024.
01:20 PM
ECB raises inflation forecast
The central bank has also significantly increased its forecasts for inflation.
It now expects inflation to average 8.1pc this year, 5.5pc in 2023 and 2.3pc in 2024.
01:19 PM
ECB: Inflation is 'far too high'
The ECB says it opted for a record interest rate rise by inflation remains "far too high" and is likely to stay above target for an extended period.
The Governing Council says it expects to raise interest rates further at its next few meetings.
01:16 PM
ECB raises interest rates by record 75 basis points
The ECB has raised interest rates by a record 75 basis points in a bid to keep a lid on inflation.
The central bank has raised its key rate to 1.25pc.
🇪🇺 Historic decision: the ECB hikes policy rates by 75bp for the first time ever (*), to 0.75% for the deposit rate and 1.25% for the main refinancing rate. pic.twitter.com/YgNbJ9hGlz
— Frederik Ducrozet (@fwred) September 8, 2022
01:10 PM
ECB poised for interest rate decision
In a few moments we'll take a hiatus from the energy crisis (sort of) to focus on the ECB's interest rate decision.
The central bank is expected to raise rates further to tackle surging inflation as the energy crisis deepens.
The question is whether it'll be a record 75 basis-point increase, or a more cautious 50 basis-point one.
01:01 PM
Minister statements on energy support
Here's what top Cabinet minister's in Liz Truss's Government have said about the measures.
Chancellor Kwasi Kwarteng:
Millions of families and businesses across the country can now breathe a massive sigh of relief, safe in the knowledge that the Government is standing behind them this winter and the next.
The price of inaction would have been far greater than the cost of this intervention. Not only can we provide urgent support now, but the beauty of our scheme is that it will also bring down inflation, helping tackle wider cost-of-living pressures.
Business Secretary Jacob Rees-Mogg:
The global headwinds caused by Russia’s war in Ukraine, Putin’s weaponisation of energy and the aftermath of Covid, have exposed the need to strengthen Britain’s energy security for the good of the nation and the millions of households and businesses who will struggle to meet the cost of bills this winter.
The action we are taking today will reduce that worrying burden in the short term and will invigorate the long-term reforms we need to complete, to resolve the underlying problems in the energy market and ensure the British people enjoy affordable and plentiful energy in future.
12:55 PM
Liz Truss's energy plan to cost up to £200bn
Liz Truss’s plan to support families and businesses with surging energy bills will cost the Government as much as £200bn, according to City estimates.
Tim Wallace has the details:
Economists think the bill to the public purse from the sweeping intervention will be between £150bn and £200bn.
George Buckley at Nomura predicts “energy price caps could cost the taxpayer £150bn over the course of the coming two years, twice the amount spent on the furlough scheme during the pandemic lockdowns.”
Once other cost of living aid is included too, Sanjay Raja at Deutsche Bank estimates the “new energy support package to be near £200bn – amounting to roughly half the scale of pandemic support measures”.
The bill freeze alone comes in at around £96bn, he estimates, with another £18.3bn to reverse April’s national insurance raid on workers and their employers, plus £5.2bn for a boost to universal credit.
Additional costs come from the expected cancellation of Rishi Sunak’s planned jump in corporation tax - foregoing £15.2bn of previously anticipated revenues - plus business rates relief, a potential VAT cut for the hospitality and leisure sectors, and a £40bn freeze in business energy bills. He tots this up at around £180bn.
12:47 PM
IoD welcomes 'pragmatic' energy bill support
Jonathan Geldart, director deneral of the Institute of Directors, says businesses will welcome the Government's “pragmatic intervention”.
It is particularly encouraging that the intervention will of itself put downwards pressure on consumer price inflation, which has been top of the business worry list for the best part of a year.
We also welcome the reiteration of the government’s commitment to achieving our net zero targets, as well as a long-term review of energy regulation to fix underlying problems, the ambition to become a net exporter of energy by 2040, and pricing renewable energy through contracts for differences rather than at the marginal cost.
What we need now is an external reassurance that the scale of the intervention does not jeopardise the public finances. That’s why it’s crucially important that the Office of Budget Responsibility can swiftly produce its independent assessment of the impact on government debt and the wider macroeconomy.
We also want to see greater support for smaller businesses trying to accelerate their own path to net zero. We would hope that the anticipated policy work on how our climate targets can be achieved in a ‘pro-growth’ way, as the Prime Minister announced, can include such an assessment as a priority.
12:43 PM
Greenpeace: Fossil fuel giants 'uncorking the bubbly'
Campaign group Greenpeace isn't happy about the lack of windfall tax or the decision to scrap the fracking ban.
Rosie Rogers, head of oil and gas for Greenpeace UK, says:
Millions of people will breathe a sigh of relief at being pulled back from the brink of fuel poverty, but it's the fossil fuel giants that will be uncorking the bubbly.
Liz Truss has decided to let the likes of Shell and BP enjoy the billions they’re making from the enormous suffering caused by the climate and energy crisis, leaving UK taxpayers to foot the bill.
If that wasn't enough, she's unleashing a drilling frenzy in the North Sea, and fracking in the countryside, which will do nothing to lower energy bills but will boost these companies' profits and unleash more heatwaves, droughts and storms on us all.
This approach will not create the energy future we need, with insulated homes and efficient heating powered by cheap renewable energy, but it may break the decarbonisation promises made to the public, on the back of which this government was elected.
12:38 PM
British Gas boss: Measures will bring 'immediate relief'
Chris O’Shea, chief executive of British Gas owner Centrica, has welcomed the new support.
We know people are deeply worried about the increase in their energy bills this winter.
Extraordinary circumstances call for us all to think differently and we know this bold customer support package from the new Prime Minister and Chancellor will bring immediate relief to hard pressed households.
We applaud the speed and scale of action. Alongside this support, we will continue to donate 10pc of British Gas energy supply profits to help thousands of vulnerable households for the duration of the crisis.
12:31 PM
Liz Truss vows to have shale gas flowing within six months as she lifts fracking ban
Liz Truss has vowed to get shale gas flowing out of Britain by next spring after lifting the ban on fracking, write Matt Oliver and Ben Riley-Smith.
Under plans to make Britain energy independent again by 2040, the Prime Minister pledged to strengthen supplies with more domestic oil and gas extraction alongside the development of nuclear and renewable power schemes.
She said this would see the moratorium on fracking – in place since 2019 – scrapped with immediate effect, paving the way for developers to begin extraction in as little as six months in areas “where there is local support”.
From next week, the Government will also make more than 100 new licences for oil and gas extraction in the North Sea available.
The changes, which could take years to bear fruit, will make no difference to supplies this winter.
But they are aimed at helping Britain to become a net energy exporter by 2040, combined with plans already announced by Boris Johnson to build 24 gigawatts worth of nuclear power capacity by 2050, new offshore wind farms and solar farms.
12:26 PM
Key points: Liz Truss reveals plan to tackle energy crisis
Want a more detailed round-up of everything Liz Truss has announced today?
Here's everything you need to know, from our politics editor Ben Riley-Smith and breaking news editor Gareth Davies.
12:23 PM
UK to suffer shorter recession
Here's more from Szu Ping Chan:
Ms Truss added that the cap would help to reduce government debt service payments, particularly the quarter of the UK's £2 trillion debt pile that is directly linked to the retail prices index (RPI) measure of inflation.
The move will also reduce price increases across the economy, but curb rises in benefits. Measures of inflation are directly linked to a wide range of prices and payments across the UK, including pensions, phone bills, rail fares, air passenger duty and debt interest.
Paul Dales, an economist at Capital Economist, said the measures also meant the UK would suffer a shorter recession at the end of the year:
"The smaller drag on real incomes means that the recession may be shallower too, perhaps with a peak to trough fall in GDP of around 0.5pc rather than 1pc."
However, Mr Dales said inflation could remain more elevated for longer as a result of the move. "The policy will boost inflation further ahead. As such, the risks to our forecast that interest rates will rise from 1.75pc now to 3pc are increasingly on the upside."
Economists suggested that this would not be the end of government intervention in energy markets.
12:19 PM
Energy support set to slow inflation
Liz Truss's decision to freeze energy bills will boost economic growth and arrest the rapid rise in inflation, the Government has claimed.
Our economics editor Szu Ping Chan has more:
The Prime Minister said the decision to cap bills at £2,500 would save the typical household £1,000 a year and "give people certainty" about their bills.
Economists said the move to cap bills would substantially reduce inflation in the near term, with the Government claiming the peak in price rises would now be between four and five percentage points lower than if the price cap was allowed to rise to £3,549 in October and even further in January.
The government based its assumptions on a range of external forecasts, with some economists now predicting that inflation has already peaked.
Analysts at Barclays said the cap meant inflation, as measured by the consumer prices index (CPI), had reached a high of 10.1pc in July, with the headline rate now likely to fall to 9.7pc in October and 5.2pc by next summer.
Others said inflation would peak in the autumn instead of the New Year. Capital Economics believes inflation will rise to 11.5pc in November, instead of 14.5pc in January, while Goldman Sachs now forecasts a 10.8pc peak in October, significantly lower than its previous peak of 14.8pc in January.
Goldman also expects a "sharper deceleration in inflation next year", falling to 2.4pc by the end of December 2024, just above the Bank of England's 2pc target.
The Bank is also likely to revise down its inflation forecasts when it publishes its next evaluation of the economy in November. Last month, it predicted inflation would peak at 13.3pc in October.
12:16 PM
Orcadian Energy: North Sea licences not enough
Steve Brown, chief executive of Orcadian Energy, is more sceptical about the plan to issue more than 100 new North Sea oil and gas exploration licences.
The Prime Minister is right to prioritise licenses in the North Sea, but that is only half the battle. Accelerating licences but failing to increase investment into North Sea projects will not help with domestic energy security.
Owning a license is like owning a plot of land. There is no benefit if you do not have the money to build a house on it. We need both licenses and funding to reinvigorate the sector.
We in the industry recognise the need to transition to net zero by 2050, but this must not come at the cost of financial hardship for millions.
The market needs rebalancing – quite simply, we need as much affordable energy as we can get. Government has an opportunity to correct the mistakes of the last by incentivising domestic energy investment.
We need additional investment in the oil and gas sector in order to shore up our own domestic energy supply. Whilst the Energy Profits Levy does include nuances to increase investment, we need to go further than that and increase investor confidence.
The Government must find innovative ways of encouraging investment in the sector, to lower bills for households in the long-term and increase our own domestic energy sector.
12:15 PM
Octopus Energy welcomes new support
Greg Jackson, chief executive and founder of Octopus Energy, has welcomed the new measures:
It's great to see this major support for households and businesses. Companies and government are now working through the details and customers should sit tight and wait to hear from their energy supplier.
Nothing will change until 1st October and we'll be in touch with everyone before then.
12:12 PM
Summary: Liz Truss's energy support plan
Here's a rundown of the main points from Liz Truss's energy support plan, courtesy of my colleague Jack Maidment:
Two-year “Energy Price Guarantee” to be rolled out.
Typical UK household will pay no more than £2,500 a year on their energy bill for the next two years, starting from October 1.
Will save the average household £1,000 a year based on current energy prices.
Increase domestic oil and gas production by launching a new oil and gas licensing round as early as next week.
Lift the ban on fracking to enable shale gas production in areas where there is local support.
New six month support scheme for businesses will see them offered equivalent help on energy bills to what is being provided to consumers.
Government claims the package will boost economic growth and reduce inflation by 4-5 points.
12:11 PM
Stocks unmoved by support package
While the pound has clawed back some of its losses, there's not much reaction elsewhere on the markets.
The FTSE 100 is still up around 0.3pc, while the domestically-focused FTSE 250 slipped 0.1pc.
Investors have been selling off UK assets heavily in recent weeks, spooked by the scale of the country's economic challenges and concerns about whether Ms Truss's plan to cut taxes and raise spending is the right one.
12:06 PM
Keir Starmer: Who is going to pay?
Liz Truss has finished speaking and the Labour leader Sir Keir Starmer is on his feet now.
His main point - who is going to pay?
He points to the estimated £170bn in unexpected profits for energy companies and calls for an expansion of the existing windfall tax.
Ms Truss has made it clear she has no intention of doing that.
12:05 PM
Pound rises on energy bill support
Sterling has reversed its earlier losses to push higher after Liz Truss outlined her plan for energy bills support.
The pound rose as much as 0.5pc against the dollar to $1.553. It comes after the currency slumped to its weakest since 1985 yesterday.
12:02 PM
UK to end ban on fracking
Liz Truss also confirms that the Government will scrap the moratorium on fracking, which has been in place since 2019.
It's a controversial move, and the Prime Minister says fracking will take place "where there's support for it".
12:00 PM
Government to launch two energy reviews
The Government will launch two reviews as part of the efforts to tackle the energy crisis.
The first will be a review of energy regulation, which will aim to fix underlying problems in the market.
Second is a review to ensure Net Zero is delivered by 2050 "in a way that is pro-business and pro-growth".
11:54 AM
Energy support to curb inflation by 5pp
Liz Truss says the new energy support measures will bring down UK inflation by as much as five percentage point.
As well as offering some relief for consumers, this will lead to a reduction in the cost of servicing government debt.
11:52 AM
UK to ramp up North Sea oil and gas production
The Prime Minister confirms the ramping up of domestic oil and gas production.
She says there Government will issue more than 100 new licences for oil and gas exploration in the North Sea.
11:50 AM
Truss: This won't be funded through windfall tax
The Prime Minister says the Government “will not be giving in to the Leader of the Opposition who calls for this to be funded through a windfall tax”.
She adds: “That would undermine the national interest by discouraging the very investment we need to secure home-grown energy supplies.”
11:48 AM
Truss: We're taking a pro-growth, pro business approach
Liz Truss says the Government is taking a "pro-growth, pro-business" approach to the crisis.
11:46 AM
Costs to be set out later this month
It seems we're getting no numbers with today's announcement.
Liz Truss says the Chancellor will outline the full cost of the package at a planned fiscal event (read: Budget) later this month.
11:45 AM
Energy support for businesses
Liz Truss says there'll be "equivalent" support for UK businesses.
This will run initially for six months, helping companies to survive the winter. After that there'll be targeted support for vulnerable industries such as hospitality.
This will be reviewed after three months.
11:42 AM
Energy bills to be frozen at £2,500
The Prime Minister confirms a new Energy Price Guarantee.
A typical household will pay no more than £2,500 per year for the next two years from October. This will save a typical household £1,000 a year.
It's in addition to the £400 support already announced, and replaces Ofgem's price cap.
11:41 AM
Liz Truss starts speaking
The Prime Minister is on her feet to announce the new energy support. Don't go anywhere.
11:28 AM
Energy support could be biggest post-war package
We're just moments away from Liz Truss's announcement on energy bills.
It's not yet clear how much the support measures will cost, but it's worth noting that it's likely to be the biggest Government spending package since the Second World War, usurping pandemic spending.
11:00 AM
Liz Truss arrives at Parliament
Liz Truss's motorcade has arrived at Parliament ahead of her announcement on energy bills support.
The new Prime Minister is expected to get to her feet at around 11.30am. Markets are watching in anticipation for the details of the support, as well as how it'll be funded.
10:32 AM
Fracking ban to be scrapped
Alongside there new North Sea oil and gas licences, there's also going to be a controversial decision on fracking.
The Government will scrap the ban on fracking, which has been in place since 2019, giving the green light for companies to seek planning permission to drill for shale gas in the UK.
Implementing the change can be done with a written ministerial statement to Parliament rather than full legislation, meaning the removal of the ban will rapidly take effect, reports our political editor Ben Riley-Smith.
It'll be a controversial move, however. Although Ms Truss has said local communities will need to back such schemes, fracking companies will offer 25 per cent reductions to their energy bills as an incentive.
The impact on energy supplies could be improved if rules on planning regulation, environmental permits and seismic activity are loosened.
🚨BREAKING: The fracking ban will be scrapped **tomorrow**. Planning requests for new drilling expected within weeks. Major change in UK energy rules. More in @Telegraph.
— Ben Riley-Smith (@benrileysmith) September 7, 2022
10:21 AM
Wagamama owner suffers summer slowdown
The owner of Wagamama swung to a profit over the last six months but suffered a slowdown in demand during the summer heatwave.
The Restaurant Group said like-for-like sales slowed at Wagamama and its leisure brands – which include Frankie & Benny's – during August.
However, chief executive Andy Hornby told PA that sales have since recovered and said the company's pub operation was boosted by warm weather.
The group, which also owns the BarBurrito brand, posted a £10.2m pre-tax profit for the six months to July 3, compared to a £19.9m loss over the same period last year.
Sales almost doubled to £423.4m following the relaxation of pandemic restrictions.
10:07 AM
Liz Truss to announce 'dozens' of new North Sea oil and gas licences
Liz Truss will reportedly announce dozens of new North Sea oil and gas exploration licences in an effort to boost domestic production.
The exact number of new licences has yet to be confirmed but could be as many as 130, Reuters reports. The announcement could come as soon as today.
Liz Truss is due to set out to parliament her plans for tackling soaring energy bills in around an hour.
During the leadership campaign, she repeatedly said boosting domestic energy supply would be part of her focus in seeking to bring down prices.
However, new licences won't offer any short-term relief to energy bills as it typically takes between five and 10 years from initial exploration until oil and gas is produced from a field.
09:59 AM
Pound slides ahead of Truss's energy plan
Sterling was sliding back to its 37-year low this morning as markets brace for Liz Truss's announcement on energy bills support.
The pound fell 0.4pc to $1.1486, heading back towards the $1.1407 it hit yesterday – the lowest since 1985. The euro hit a fresh two-and-a-half month high against the pound at 86.95p.
Liz Truss is expected to outline a package of energy bill relief for households and businesses worth at least £100bn. Markets are waiting anxiously for details of how it will be funded.
The other main event of the day is the ECB meeting. Investors are waiting to see if the central bank will go for a large 50 basis-point increase in interest rates or a record 75 basis-point one.
09:42 AM
Tesla's China factories surge back to life
Tesla's operations in China are back in full swing after a factory upgrade and lockdowns in Shanghai slowed production earlier in the year.
Elon Musk's electric car brand delivered 76,965 Chinese-made vehicles in August – just below June’s record of 77,938 and a sharp rebound from July’s 28,217.
Assembly lines in Shanghai were suspended for upgrades in July to double the factory’s annual capacity to about 1m units.
Of the August total, 34,502 went to the local market and 42,463 were shipped overseas,
09:27 AM
Euro holds above 20-year low ahead of ECB decision
The euro is hovering above the two-decade low hit earlier this week as investors await this afternoon's interest rate decision from the ECB.
The central bank is expected to raise rates by 75 basis points, taking its deposit rate above zero for the first time since 2012, although a more modest increase of 50 basis points hasn't been ruled out.
The euro fell 0.3pc against the dollar to $0.99795, holding above its lowest level since late 2002 as Europe's energy crisis keeps the single currency under pressure.
09:14 AM
Morrisons' takeover of McColl's could lead to higher prices, watchdog warns
The takeover of convenience store chain McColl's by Morrisons could lead to higher prices in 35 local areas, the competition watchdog has warned.
The Competition and Markets Authority launched an investigation into the deal, worth a reported £190m, in July.
McColl's has around 1,100 stores across the UK, while Morrisons runs roughly 500 supermarkets across the UK. Morrisons' owner Clayton Dubilier & Rice also owns Motor Fuel Group, which runs over 800 convenience stores, mostly attached to its petrol stations.
The CMA said that while the tie-up would not harm the vast majority of shoppers, it raised concerns in 35 areas where competition would be reduced.
This could lead to higher prices or lower quality services, it warned. Morrisons now has five days to offer proposals to the regulator to address the concerns.
Sorcha O’Carroll, CMA senior director of mergers, said:
As the cost of living soars, it’s particularly important that shops are facing proper competition so that customers get the best prices possible when picking up essentials or doing the weekly shop.
While the vast majority of shoppers and other businesses won’t lose out, we’re concerned that the deal could lead to higher prices for people in some areas. If Morrisons and McColl’s can address these concerns, then we won’t need to move on to an in-depth investigation.
09:06 AM
The housing market can still avoid a crash – here’s how
Britain has faced many economic travails over the past decade, ranging from Covid and war to the uncertainties and paralysis of Brexit. But there has been one constant on which to rely.
Tim Wallace writes:
No matter the perils of the wider world, the housing market has kept on rising. Twelve months after the EU referendum, prices were up 4.2pc despite the gloomsters’ warnings.
The pandemic stopped us visiting friends, family and, often, workplaces, yet house prices exploded. Annual growth soared from 1.3pc in February 2020 to a peak of more than 13pc in mid-2021.
Yet this long and mighty bull run may now be fighting so many assailants that it will be forced to a halt, or even into decline.
There were signs of a slowdown earlier in the summer, though predictions at the time of the death of the boom years proved premature.
09:00 AM
Germany to help homes and businesses with energy bills
Ahead of Liz Truss's announcement on energy bills later this morning, similar plans are afoot on the continent.
Germany plans to subsidise a basic level of electricity usage for households and set aside power for small and medium-sized businesses as part of its support measures.
Electricity distributors would be required to grant households a certain electricity quota at a discounted price per kWh, with a similar contingent planned for small and medium-sized enterprises, Reuters reports.
The goal is to decouple the price of electricity from the price of gas, which has soared since the start of the Ukraine war.
Germany's economy ministry also detailed a planned cap on electricity prices for producers, with the difference on the market price to go towards funding the relief.
According to documents, Berlin also backs EU plans to impose a price cap on electricity, according to the paper. However, it said: "If agreement cannot be reached quickly enough at European level, a national solution should be sought."
08:50 AM
Lloyd’s to take £1.25bn hit from Ukraine war
Lloyd’s of London has revealed it expects a £1.25bn hit from the Ukraine war as the insurance giant starts to feel the impact of the conflict.
Many of the losses are set to come from the aviation sector as planes were grounded, while stranded cargo ships and bad debts will also take their toll.
Lloyd’s has already put aside £1.1bn in the first half for claims, while the fallout from the pandemic and rising inflation also pose a threat.
John Neal, chief executive of the insurance exchange, said the number was an estimate of potential claims and might not be needed.
Despite this, the exchange posted a £1.4bn profit in the first half of the year.
08:49 AM
FTSE risers and fallers
It’s a positive start to the day for the FTSE 100, which has gained ground against an uncertain backdrop of interest rate rises and energy bills support.
The blue-chip index rose 0.3pc in early trading, driven higher by commodity stocks.
Mining stocks tracked copper prices higher amid concerns about potential supply disruptions in major producer countries.
Melrose was the biggest riser, up as much as 3pc to the top of the FTSE 100 after announcing plans to spin off two GKN divisions into a new car business.
Primark owner Associated British Foods dropped 8pc to the bottom of the index following a profit warning.
The domestically-focused FTSE 250 also rose 0.3pc. Darktrace crashed 30pc after US private equity firm Thoma Bravo walked away from takeover talks.
08:48 AM
Darktrace shares crash as takeover talks collapse
Darktrace shares suffered their biggest fall on record this morning after US private equity firm Thoma Bravo pulled out of takeover talks.
The cybersecurity firm revealed it was in early discussions with Thoma Bravo about a possible takeover last month, but said “an agreement could not be reached on the terms of a firm offer”.
The private equity firm separately said it reserved the option to make a bid under certain circumstances over the next six months.
Shares in Darktrace tumbled 30pc to the bottom of the FTSE 250.
08:11 AM
Primark owner warns on profit as energy costs rise
The owner of Primark has warned of lower profit next year due to rising energy costs and a weak pound.
Associated British Foods said sales and profit in the current year on track. But Primark's operating margin is set to narrow in the second half and get even worse next year, despite recent price increases.
Soaring energy bills are putting pressure on the retailer, while exchange rates are hurting Primark, which buys most of its clothing stock in dollars. The pound yesterday dropped to its lowest since 1985.
08:04 AM
Liz Truss to unveil energy support this morning
The big focus of the day is on Liz Truss, who's due to unveil her support measures for energy bills.
The new Prime Minister is due to speak in the Commons at around 11.30. We're expecting a freeze on household bills and a new fixed price for businesses, but the devil will be in the details.
Simon Clarke, the Levelling Up Secretary, said this morning: “Let’s be clear, if we fail to act, if we don’t protect the economy against the shock of the size and scale that we are talking about then there is going to be enormous economic damage in any event.”
08:01 AM
FTSE 100 opens higher
The FTSE 100 has gained ground at the open, with focus on Liz Truss's announcement on energy bills support.
The blue-chip index rose 0.3pc to 7,257 points.
07:59 AM
Melrose to spin off car business in GKN break-up
Turnaround specialist Melrose Industries will split its GKN Automotive and GKN Powder Metallurgy businesses into a separate division, with plans to create a listed company targeting acquisitions in the car sector.
The new group, to be based in London, will target deals in the rapidly-changing automotive industry either via cash offers or share-based transactions, it said.
Melrose took control of GKN in 2018 after investors accepted its £8.1bn hostile takeover offer. Before that, GKN had considered selling its powder metallurgy business.
07:54 AM
Liz Truss to shake up energy market
Good morning.
Liz Truss is gearing up for an overhaul of the energy market as part of a wider package of support with soaring bills.
Renewable energy producers have agreed in principle to accept new long-term contracts at prices well below the current rates, the BBC reports.
The move is seen as a way of capping excessive profits for renewable and nuclear energy generators without imposing a windfall tax.
It will come as part of a broader package of support outlined today, including a freeze on energy bills for households and businesses.
5 things to start your day
1) iPhone 14 launch: Apple hikes prices by £150 for UK customers The tech giant has increased the launch price of its iPhones in the UK by up to £150.
2) TikTok is ‘a tool of espionage and must be banned in the West’ Boss of German publisher claims the social media app is controlled by China's communist party
3) Heineken buys out Led Zeppelin son’s craft brewery Logan Plant's Beavertown joins long list of British independents snapped up by beer giants.
4) The housing market can still avoid a crash – here’s how The dire economic situation is taking a toll on the property market but there are still supports which may prevent a crash.
5) Putin threatens to ‘freeze’ Europe with total energy cut-off - Russian leader vows to stop all supplies if Brussels goes ahead with price cap on his gas
What happened overnight
Most Asian markets enjoyed a rare advance on bargain-buying on Thursday.
Tokyo led the gains, helped by data showing the Japanese economy performed better than initially thought in the second quarter, while there were also gains in Shanghai, Sydney, Seoul, Singapore, Wellington, Taipei, Manila and Jakarta.
Hong Kong bucked the trend.
Coming up today
Corporate: Genus (full-year results), Energean, International Public Partnerships, Melrose Industries, Spire Healthcare, Vistry Group (interims), Safestore Holdings, (trading statement)
Economics: ECB interest rate decision (EU), jobless claims (US)
