AFP

Britain on Tuesday axed its £1,500 ($1,800) subsidy for buyers of new plug-in cars as it focuses on other types of electric vehicles, but the news drew anger from the auto sector.

“The government is today closing the plug-in car grant scheme to new orders after successfully kickstarting the UK’s electric car revolution,” the Department for Transport (DfT) said in a statement.

The grant was launched in 2011 to help encourage Britons to ditch high-polluting diesel and petrol cars.

It has since supported the sale of almost half a million electric cars, the DfT added, stressing that the subsidy was always a “temporary” policy.

Sales of fully electric cars rocketed from less than 1,000 in 2011 to almost 100,000 vehicles in the first five months of this year alone.

However, the government is now switching its focus to offer subsidies on sales of new plug-in electric taxis, motorcycles, vans, trucks and wheelchair-accessible vehicles.

Britain plans to ban new sales of diesel and petrol cars in the UK from 2030, as part of its goal to reach net zero carbon emissions by 2050.

Tuesday’s announcement drew stark criticism from industry body the Society of Motor Manufacturers & Traders (SMMT).

“The decision to scrap the plug-in car grant sends the wrong message to motorists and to an industry which remains committed to government’s net zero ambition,” said SMMT boss Mike Hawes.

“Whilst we welcome government’s continued support for new electric van, taxi and adapted vehicle buyers, we are now the only major European market to have zero upfront purchase incentives for EV car buyers.”

Britain’s automobile sector had stalled last year on pandemic fallout including a semiconductor shortage.

However, greener electric vehicles now account for one in six new car sales.

That rises to just over half of all new car sales, if hybrid vehicles are included.

Air travel chaos in Britain is purely down to Brexit “shambles” by hobbling recruitment at airports, Ryanair boss Michael O’Leary said on Tuesday.

The CEO of Europe’s biggest airline also dismissed threats of summer strike action by what he called “Mickey Mouse” unions in Belgium and Spain covering some Ryanair workers.

And he said his company has dropped a controversial pre-boarding questionnaire for South African passport holders requiring them to answer questions in Afrikaans — a language commonly used by just 12 percent of South Africans, many of them white.

O’Leary told AFP that “100 percent” of the woes experienced by air passengers in the UK — including massively long lines and cancelled flights — was because “Brexit has been a shambles”.

“It was delivered by a government led by Boris Johnson that is also a shambles. It was inevitable that Brexit would constrain the labour market, you see,” he said.

O’Leary said Britain’s decision to pursue a hardline departure from the European Union that put a halt to EU workers filling jobs is largely why it was difficult to quickly ramp up recruitment for ground and security staff at UK passports.

Airports and airlines in several countries, including in the EU and the US, have struggled to cope with surging numbers of travellers, many of them keen to fly after months or years of being grounded because of Covid restrictions.

O’Leary said that unlike European rivals Air France and Lufthansa, low-cost Ryanair had fully bounced back from the pandemic and was flying 115 percent of the passenger loads recorded before the coronavirus hit.

Rising inflation was only pushing more passengers into Ryanair seats, he argued, while acknowledging that the airline was raising ticket prices by around 9 percent.

He said the company’s hedging on fuel prices through to March next year was keeping it competitive.

– Strike threats –

But unions in Belgium, Portugal and Spain are threatening to clip Ryanair’s peak summer revenues with strikes later this month to demand better pay and conditions.

O’Leary shrugged off the walk-out warnings.

“We think there will be very few strikes, if any, and those strikes will be meaningless and won’t be noticed by anybody,” he said.

“We operate two and half thousand flights every day. Most of those flights will continue to operate even if there is a strike in Spain by some Mickey Mouse union or if the Belgian cabin crew unions want to go on strike over here,” he added in a media conference.

O’Leary said that, in Belgium, the airline had “reached agreement with the unions representing over 90 percent of our pilots and cabin crew” and was continuing negotiations.

A Portuguese union joined the strike movement on Tuesday, announcing a three-day work stoppage from June 24 to 26 to “draw attention to multiple attacks on the dignity of workers”.

On the controversial Afrikaans test, the Ryanair boss said the company had tried to respond to a rise in detection of false South African passports.

“We suffer a fine of 2,000 euros for every passenger who arrives in Dublin from Bodrum (in Turkey) with a false South African passport,” he said.

He added that, while the airline had been asking South African passport holders to answer local general knowledge and geographical questions in Afrikaans, it got rid of the questionnaire.

“We didn’t think it was appropriate either. So we have ended the Afrikaans test, because it doesn’t make any sense,” he said, adding that “South Africa needs to fix its problems”.

South Africa’s government had called the test “backward profiling”. 

Afrikaans is just one of 11 official languages in South Africa, and it played a role in the oppression of black citizens during apartheid.

Stock markets mostly fell on Tuesday as investors fret over the possibility that the US Federal Reserve will move aggressively to combat inflation.

Panic has swept through trading floors since data on Friday showed US consumer prices rising at their fastest pace in decades on surging energy and food costs caused by the Ukraine war and supply chain snarls.

Investors are now bracing for the Fed’s interest rate decision on Wednesday as it struggles to walk a fine line between reining in inflation and trying to keep the economy on track.

“While there is no doubt that inflation is a considerable challenge for the US at this point, slamming on the brakes too hard risks pushing the economy off its track,” said Tai Hui, chief market strategist for Asia at JP Morgan Asset Management. 

The inflation reading has raised expectations that the US central bank could raise rates by a hefty 75 basis points, higher than its previous 50-point hike.

“The mood has turned very negative since the latter half of last week,” said Craig Erlam, analyst at online trading platform OANDA.

“Now all the talk is about if we’re heading for a recession and how bad it will be,” Erlam said.

Those recession fears sent Wall Street plunging on Monday, with the broad-based S&P 500 stocks index sinking into a bear market after dropping more than 20 percent from its recent peak.

After opening higher on Tuesday, US indices diverged near midday, with the S&P 500 flat while the Dow fell and the tech-heavy Nasdaq rose.

“An anaemic and now rapidly disappearing bounce in US markets shows us that investors are very cautious about going bargain-hunting ahead of tomorrow’s momentous Fed decision,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“Not just 75bps but even 100bps are being viewed as a possibility on Wednesday evening, as the committee looks to try and steal a march on inflation,” he said.

London, Paris, Frankfurt and most Asian equities closed in the red.

Oil prices, which have fuelled the global inflation surge, rose more than 1.5 percent, with Brent North Sea Crude, the international benchmark, above $124 per barrel.

Cryptocurrencies have mirrored the falls in the stock markets, with bitcoin tumbling to an 18-month low under $23,000 this week.

Digital currency exchange Coinbase said Tuesday it will lay off 18 percent of staff, citing tight economic conditions and an overly rapid expansion.

– Key figures at around 1545 GMT –

New York – Dow: DOWN 0.4 percent at 30,410.87 points

London – FTSE 100: DOWN 0.3 percent at 7,187.46

Frankfurt – DAX: DOWN 0.9 percent at 13,304.39 

Paris – CAC 40: DOWN 1.2 percent at 5,949.84 

EURO STOXX 50: DOWN 1.1 percent at 3,405.06 

Tokyo – Nikkei 225: DOWN 1.3 percent at 26,629.86 (close)

Hong Kong – Hang Seng Index: FLAT at 21,067.99 (close)

Shanghai – Composite: UP 1.0 percent at 3,288.91 (close)

Euro/dollar: UP at $1.0414 from $1.0412 late Monday

Pound/dollar: DOWN at $1.2004 from $1.2136

Euro/pound: UP at 86.77 pence from 85.76 pence

Dollar/yen: UP at 134.88 yen from 134.42 yen 

Brent North Sea crude: UP 1.7 percent at $124.34 per barrel

West Texas Intermediate: UP 1.5 percent at $122.77 per barrel

burs-lth/pvh

US central bankers opened their two-day policy meeting Tuesday amid a blistering inflation surge that has ignited predictions the Federal Reserve will approve the biggest interest rate hike in more than 27 years.

Fed Chair Jerome Powell has signaled that policymakers were poised to implement another half-point increase in the benchmark borrowing rate this week and another next month.

But a growing number of voices are now calling for a more aggressive three-quarter point hike in response to the big, unexpected jump in the consumer price index in May, which defied widespread expectations the data would show inflation pressures easing.

A Fed spokesperson confirmed the meeting of the policy-setting Federal Open Market Committee began as scheduled at 1500 GMT. Markets will get the rate decision on Wednesday at 1800 GMT.

Officials will debate how high to raise borrowing costs amid surging prices and fears of a bout of 1970s-style stagflation if their efforts to cool the economy clamp down on growth as well.

After dropping the rate to zero since March 2020 in a successful bid to help the world’s largest economy avoid a devastating downturn and recover quickly from the impact of the Covid-19 pandemic, the Fed has raised rates twice, including a big, half-point increase last month.

Low lending rates and the boost from massive federal stimulus caused demand to outstrip supply amid global supply chain snarls, pushing prices higher, and the Russian invasion of Ukraine added more fuel to the inflation fires, sending food and fuel prices soaring.

– Credibility boost or negative surprise? –

Economists thought March was the peak of CPI, but the rate spiked in May, jumping 8.6 percent in the latest 12 months.

“Given the latest information on inflation, we believe that risk-management considerations call for aggressive action to reinforce the Fed’s inflation-fighting credibility,” Barclays analysts said in a commentary.

If policymakers decide on a giant step, it would be the first 75-basis-point increase since November 1994.

But other analysts say the massive step would be unnecessary and could be viewed as panicky, and instead project an additional half-point hike in September.

“With supply improving and demand for goods falling relative to services, margins will compress and inflation will fall much faster than markets and the Fed expect,” Ian Shepherdson of Pantheon Macroeconomics said in an analysis.

He noted that many of the factors driving the price spikes are “outside the Fed’s control, like oil prices.”

The consensus remains for policymakers to stick to the plan, and central bankers are typically loath to surprise markets, although they insist their decisions are “data dependent” and will adjust to evolving situations.

Karl Haeling of LBBW said markets are pricing in at least one 75-basis-point increase in the next three meetings, but chances of that happening this week are “50-50.”

“We believe they will probably avoid raising by 75 bps to reduce risk of an even bigger stock market plunge. But the coming barrage of Fed officials giving public comments after Wednesday will probably suggest that 75 bps is certainly possible at July’s FOMC,” he said.

Barclays said despite the element of surprise, “an aggressive move in June would provide the committee with the biggest bang for its buck, sending a resounding signal of the Fed’s resolve to guide inflation back to its 2 percent target.”