15th December 2022
Bite-sized business news from the UK and beyond
Good morning
Today's stories
Inflation eases up
Crypto crunch time as FTX fallout continues
ECONOMYInflation eases up
What happened?The Office of National Statistics reported yesterday that UK inflation fell in November to 10.7% from 11.1% the previous month largely driven by the fall in petrol and used car prices. The drop was better than the 10.9% expected by economists and gives a glimmer of hope that inflation may have peakedHow did we get here?As always, in November, inflation varied for different products and services. The easing of international supply chains â which had been clogged up following the end of Covid lockdowns - helped cool the price of many goods. However this was offset by the ongoing increase in energy bills and prices in restaurants, pubs and cafĂ©s.The Bank of England is meant to keep inflation at around 2% but has been unable to do this in 2022 mainly due to the soaring cost of energy exacerbated by the war in Ukraine.In response the Bank has raised interest rates eight times in a row and is expected to do so again later today. But the lower than expected inflation number means less pressure to raise rates as aggressively i.e. a 0.5% increase rather than 0.75%.Yes but: While the inflation fall is encouraging, prices are still at a 40-year high.Economists think inflation will remain elevated in the next few months and stay above the target throughout 2023. Thatâs why the Bank of England is expected to keep hiking rates into the new year, though at a slower pace. And it could be a while before the interest rates actually start falling.
Other stories to keep you in the loop
Amazon delays new hire start dates in latest effort to tame headcount
US Fed hikes interest rates by 0.5%, says more to come
Inditex profit jumps as Zara owner lifts prices
Eurostar strike action called off amid pay talks
EY poised to ramp up fintech investment with new London Lab
HSBC to end funding for new oil and gas fields
Airport security 100ml liquid rule to be scrapped
Luxury demand ârobustâ despite cost pressures, says Watches of Switzerland
CRYPTOCrypto crunch time as FTX fallout continues
What happened?This week former FTX CEO Sam Bankman-Fried (SBF) was charged with "one of the biggest financial frauds in US history" after the crypto exchange he founded collapsed with customer funds missing.Why it matters: SBF is the highest-profile crypto kingpin to face charges by US prosecutors to date for losing billions of dollars of other people's money. US authorities claim that he used customer funds as his âpersonal piggy bankâ for years, buying luxury homes and making political donations. At a hearing at the US Congress this week, new FTX CEO John Ray III said the collapse is one of the worst business failures heâs ever seen â a big statement considering he oversaw the infamous demise of energy company Enron. Ray testified that the company has very poor record keeping and that employees used QuickBooksâsoftware for small businessesâto manage the $32bn of companyâs finances.Next steps: SBF was arrested in the Bahamas, where FTX is based, and will find out in February if he will be extradited to the US. Heâs admitted to poor management decisions but denies committing fraud. If convicted he could face life in prison. But if he stays in the Bahamas, he could be sent to a prison known to be dangerously overcrowded. Zooming out: The scandal surrounding crypto has investors fleeing with whatever assets they have left. FTX was a centralized exchange (it directly held customers' funds/crypto) controlled by only a few people (vs. a decentralized exchange). The consequences it faces could set precedents for other centralized crypto players. Lawmakers and regulators are debating who, exactly, has crypto-oversight power. But as they consider new regulations following FTX's meltdown, they mostly now agree on at least one point: whoever has oversight, controls need to be tighter.
Stat of the day
Interesting links from around the web
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How to get ÂŁ10,000 worth of food for free
