US Business

Britain on Thursday lifted England’s moratorium on controversial gas fracking to boost energy security, despite breaking the ruling Conservative party’s manifesto pledge.

Prime Minister Liz Truss had flagged the move two weeks ago, shortly after taking office, in a vast package tackling turmoil in energy markets after key gas supplier Russia invaded Ukraine.

The UK had in 2019 called a halt to fracking — or hydraulic fracturing which is used to release hydrocarbons locked deep underground — due to fears it could trigger earthquakes.

The moratorium was imposed under Truss’ predecessor Boris Johnson following a series of earth tremors, but the government has switched tack after Russia cut off gas supplies to most of Europe, sending prices soaring.

– Energy security –

“In light of Putin’s illegal invasion of Ukraine and weaponisation of energy, strengthening our energy security is an absolute priority,” business and energy secretary Jacob Rees-Mogg said in a government statement.

He reaffirmed Truss’s goal of making Britain a net energy exporter by 2040.

“To get there we will need to explore all avenues available to us through solar, wind, oil and gas production — so it’s right that we’ve lifted the pause to realise any potential sources of domestic gas.”

The Department for Business, Energy and Industrial Strategy (BEIS) confirmed a new oil and gas licensing round next month for 100 new licences, but only with support from local communities.

However, the announcement sparked uproar in parliament because it broke the Conservatives’ manifesto promise from the 2019 general election.

Opposition lawmakers and Conservatives representing constituencies in northern England — where tremors were felt in 2011 — hit out.

– ‘Charter for earthquakes’ –

The main opposition Labour party labelled the new policy “a charter for earthquakes”.

Labour climate spokesman Ed Miliband questioned Rees-Mogg about where the evidence was for the decision.

“The 2019 manifesto on which he and every member of the party opposite stood said this ‘we will not support fracking unless the science shows categorically that it can be done safely’,” Miliband said before parliament.

“They are lifting the ban, but they can’t supply the evidence.”

Liberal Democrat environment spokeswoman Wera Hobhouse added that people in drilling areas were being treated as guinea pigs.

“The Conservatives’ obsession with fracking lays bare that they don’t actually think that climate change is happening and are not willing to take the urgent action needed,” said Hobhouse.

“If people suffer polluted water and dangerous earthquakes, this decision will prove unforgivable.”

– ‘Shown to be safe’ –

Rees-Mogg replied that fracking was “safe” and greener than energy sources from abroad.

“It is more environmentally friendly to use our own sources of fuel rather than to extract them from other countries and transport them here at great cost, both financially and in terms of carbon,” he said.

“It is safe. It is shown to be safe,” he insisted.

He added the policy would “bring us cheaper energy” at a time of rocketing prices.

Fracking is carried out by blasting a mixture of water, sand and chemicals underground to release shale oil and gas.

But environmentalists argue that the process contaminates water supplies, hurts wildlife, causes earthquakes and contributes to global climate change.

Green pressure groups slammed Thursday’s decision.

“Ripping up the rules that protect people from fracking would send shockwaves through local communities,” said Friends of the Earth campaigner Danny Gross.

“If the government caves into the fracking industry and allows them to cause larger earthquakes, it will further undermine confidence that fracking can be done safely.”

The BEIS also published the British Geological Survey’s scientific review into shale gas extraction.

The review highlighted “limited current understanding” of UK geology and onshore shale resources “should be a reason to drill more wells to gather more evidence and data”, the government study added.

Spain’s top criminal court has opened a fraud investigation into a Netherlands-based medicinal cannabis investment platform which allegedly swindled people around the world of millions of dollars.

The National Court opened its probe into JuicyFields on September 15 after a lawsuit filed by nearly 1,200 investors in July, a court document seen by AFP Thursday showed.

The court aims to “identify those allegedly responsible for the crimes” alleged in the lawsuit and understand the “financial mechanics” of the company.

Established in 2020, JuicyFields offered investors the chance to participate in the cultivation, harvesting and sale of cannabis plants, promising returns of up to 66 percent.

But it suddenly stopped operations in mid-July, froze cash withdrawals and vanished from the internet, investors allege.

The class action lawsuit filed by the Martinez-Blanco law firm accuses JuicyFields of operating like a Ponzi scheme, in which early investors are paid out by receipts from later investors.

It estimates that there are nearly 4,500 victims in Spain alone, who each lost an average of 6,500 euros ($6,435). Some individuals lost as much as 200,000 euros.

The minimum investment was 50 euros, and the money could be deposited and withdrawn via bank transfer or cryptocurrencies.

This is believed to be the first class-action lawsuit against JuicyFields, which according to media investigations scammed investors around the world.

A group on mobile messaging service Telegram in France for people who want to take legal action against JuicyFields has over 1,600 members.

Several members of the group say they have filed individual lawsuits against JuicyFields.

A class-action lawsuit is also expected to be filed in France against the firm.

Turkey’s central bank on Thursday cut its policy rate for the second straight month despite an annual inflation rate that has reached 80 percent and is still moving higher.

The central bank said it was cutting its one-week repo rate to 12 percent from 13 percent and blamed skyrocketing consumer prices on external factors such as the global jump in the cost of energy and food caused by Russia’s invasion of Ukraine.

The decision highlights Turkish policymakers’ strong focus on economic growth nine months before a general election that polls show President Recep Tayyip Erdogan is on track to lose.

Turkey has gone the opposite direction of other central banks worldwide which have raised their rates to combat inflation, with the US Federal Reserve and European peers announcing hefty hikes this week.

The policy has put the Turkish lira under pressure, and it touched a new historic low of 18.41 against the dollar before recovering some its losses after the announcement.

Official data show Turkey’s industrial production and retail sales both starting to slow.

“Since the beginning of July, leading indicators have been pointing to a slowdown in growth due to the weakening foreign demand,” the central bank said.

“Leading indicators for the third quarter continue pointing to loss of momentum in economic activity due to the decreasing foreign demand.”

Erdogan has openly championed economic growth at all cost.

He also rejects conventional economics and believes that inflation can be brought under control by cutting interest rates.

“I am an economist. Inflation is not an economic danger that cannot be overcome,” Erdogan told US television this week. 

“Currently, there are countries which feel threatened by inflation of even eight or nine percent. We have 80 percent,” he said.

“And in my country, the shelves are not empty in the markets.”

Turkey’s inflation rate is now the highest since 1998.

– ‘Managed markets’ –

Erdogan’s two-decade rule was built around a pledge to create a new middle-class and end the corruption and economic mismanagement that plagued successive secular governments in the 1980s and 1990s.

But his Islamic-rooted party and its hard-right nationalist allies now face the real possibility of losing their parliamentary majority in next year’s polls.

Erdogan himself is expected to struggle in a likely second round runoff against any of his potential opposition rivals.

The Turkish leader has responded to the economic crisis by radically changing his foreign policy and making up with many of his former rivals in the petrodollar-rich Arab world.

Additional deals with Russia have helped shore up Turkey’s dwindling foreign currency reserves and potentially given Erdogan enough breathing room to ride out the economic storm until June.

Analysts at Fitch Ratings said they expect the central bank to end its era of unconventional economics and start raising rates after the election.

But economists believe any rate hike would need to be dramatic to have any meaningful effect.

“The Turkish central bank’s policy rate really has little real meaning these days, given inflation at 80 percent plus,” said BlueBay Asset Management analyst Timothy Ash.

“The managed markets in Turkey are now aimed at engineering Erdogan’s re-election.”

The Bank of England hiked its interest rate sharply again Thursday to combat decades-high inflation but warned the UK economy was slipping into recession.

The BoE’s second half-point increase in a row follows this week’s super-sized rate hikes from the US Federal Reserve and other global central banks, as policymakers seek to tame red-hot consumer prices.

The BoE met most market expectations as it lifted its key rate by 0.5 percentage points to 2.25 percent, repeating its August move that had already taken borrowing costs to a 14-year high.

And it noted the inflation outlook improved as a result of British Prime Minister Liz Truss’s plans to freeze energy prices for businesses and households — and ease the nation’s cost-of-living crisis.

– Rate highest since 2008 –

“The bank rate is now at the highest level since 2008 as the Bank of England attempts to curtail spiralling price rises with inflation just shy of double digits,” said Interactive Investor analyst Victoria Scholar.

The bank also indicated the UK economy would likely shrink in the current third quarter, or three months to the end of September.

That would place it in recession after it contracted by a slender 0.1 percent in the previous three months.

The technical definition of a recession is two straight quarters of negative growth.

The bank meanwhile forecast inflation to peak next month at 11 percent, downgrading its prior guidance of 13 percent.

“Since August, wholesale gas prices have been highly volatile,” the BoE said in minutes from its gathering.

“Uncertainty around the outlook for UK retail energy prices has nevertheless fallen, following the government’s announcements of support measures including an energy price guarantee.”

– Mini-budget –

Markets are on tenterhooks, with Britain set Friday to deliver a mini-budget that will seek to boost economic activity and help cushion the cost of living.

Finance minister Kwasi Kwarteng, fresh from being appointed by Truss, is expected to reverse her predecessor Boris Johnson’s plan to hike taxes on company profits and salaries.

Commentators also warn Truss’ huge spending plans will ravage public finances that are already reeling from huge spending during the deadly Covid pandemic.

Barclays bank analysts estimate that the government’s total cost-of-living expenditure could reach a colossal £235 billion ($267 billion).

UK inflation eased in August to 9.9 percent after striking a 40-year peak of 10.1 percent in July.

Yet it remains elevated largely as a result of surging energy prices following key producer Russia’s invasion of Ukraine.

– Prices gallop higher –

Some commentators had speculated that the BoE could mirror the European Central Bank and the US Federal Reserve and spring a hike of 0.75 percentage points — which would have been the BoE’s largest in three decades.

Across the world, consumer prices have galloped to their highest levels in decades on Ukraine fallout.

Central banks have responded by increasing their rates, fanning recession fears because they push up loan repayments for consumers and companies alike.

After a jumbo rate hike in Sweden earlier this week, the Swiss and Norwegian central banks announced big increases just ahead of the BoE decision, all citing inflation concerns.

The BoE earlier this month defended itself against accusations of being too slow to tackle sky-high inflation, after Truss proposed to review its operational independence.

The BoE has now lifted rates seven times since it began in December to tighten borrowing costs from a record-low level of just above zero.

Thursday’s decision had been postponed from last week following the death of Queen Elizabeth II.

Five members of the bank’s nine-strong monetary policy committee including governor Andrew Bailey voted in favour of the hike.

Three others called for a larger 0.75-percentage-point rise, while one lone voice called for a smaller gain of just 0.25 percentage points.

Japan’s finance ministry said Thursday it intervened in the currency market to bolster the yen, which has plummeted against the dollar in recent months on the widening policy gap between the US and Japanese central banks.

It was the first government intervention to prop up the currency since 1998 and came after the dollar neared 146 yen earlier in the day.

“Although exchange rates are in principle determined by the market, excessive fluctuations caused by speculation cannot be tolerated,” Finance Minister Shunichi Suzuki told reporters.

“Based on this, we intervened in the foreign exchange market today. We will continue to monitor developments in the market with a strong sense of urgency and take necessary action against excessive fluctuations,” he added.

He declined to detail the scale of the intervention, or its length. And he refused to confirm whether it had been coordinated with Washington or other capitals, saying only he was “in constant contact with relevant monetary authorities”.

The move, which involves selling dollars and buying yen, saw the greenback retreat as low as 140.70 before gaining slightly.

Top currency official Masato Kanda told reporters that the intervention was not triggered by the yen falling to a particular level.

“We don’t think about the level at all. In principle, (what matters) is volatility.”

The yen has been weakening against the dollar for months, but sank further on Thursday after the US Federal Reserve again hiked rates to tame inflation, while the Bank of Japan left its ultra-loose monetary policy in place.

Prices in Japan are rising, with the Consumer Price Index (CPI) rising by 2.8 percent year-on-year in August, the highest level since 2014.

But the central bank views the increases as temporary, and believes its dovish policy is needed to achieve a long-standing target of sustained two-percent inflation — seen as necessary to turbocharge growth in the world’s third-largest economy.

After a two-day meeting, it said it would leave its current policy in place until “CPI exceeds two percent and stays above the target in a stable manner.”

– ‘Temporary respite’ –

A weaker yen has some positive effects, particularly for Japanese exporters, but the recent rapid depreciation has begun to stir concern in Japan, pushing up the cost of imported goods for consumers and businesses.

Earlier this month, the central bank reportedly conducted a “rate check”, an operation often seen as a precursor to a currency intervention.

The move came shortly after the yen neared the 145 point, but the reports only temporarily bolstered the Japanese unit.

It has plunged from around 115 in March, and the Bank of Japan (BoJ) on Thursday repeated that “it is necessary to pay due attention to developments in financial and foreign exchange markets and their impact on Japan’s economic activity and prices”.

But BoJ Governor Haruhiko Kuroda, whose term expires next year, told reporters before the intervention announcement that the bank’s role did not extend to moving foreign exchange.

“We haven’t been and will not be targeting certain levels of foreign exchange,” he said.

“It is desirable that forex rates reflect economic and financial fundamentals, however the recent rapid depreciation of the yen is not that and is negative for the economy,” he added.

He noted though that the dollar has gained against most major currencies, and analysts said that the yen’s surge after the intervention could prove little more than a “temporary respite”.

“Basically the only thing stopping USD/JPY from rising towards 150 is Japanese foreign exchange intervention, but even then it will only be a temporary respite,” said Alvin Tan, head of Asia FX Strategy at RBC Capital Markets.

“The yawning policy divergence between the Fed and the BoJ, along with the related widening USD-JPY yield spread, is exerting a powerful and fundamental force, propelling USD/JPY higher,” he told AFP, saying he anticipated the dollar breaking 150 yen by 2023.

European stocks sank Thursday following sharp losses in Asia and on Wall Street, but the dollar spiked after the Federal Reserve signalled more hefty US interest rate hikes.

Equities tanked after the US central bank warned of more pain to come, as it unveiled the third straight jumbo rate increase on Wednesday to tackle decades-high inflation.

The British pound briefly dived to a new 37-year low at $1.1212, even as the Bank of England prepared to announce its second bumper rate rise in a row later Thursday.

The greenback also soared to a fresh 24-year high of 145.90 yen, prompting the Bank of Japan to embark on a rare intervention to protect its currency. The euro wallowed at a 20-year dollar low.

– Pricing in recession –

“Share prices are falling, the dollar is surging, and the bond market is pricing in a recession as the US Federal Reserve keeps tightening monetary policy and seemingly snuffs out any hope for a pivot or even a pause in its new-found zeal for fighting inflation,” said AJ Bell investment director Russ Mould.

“Fed chair Jerome Powell … noted there was no painless way to bring inflation under control,” he added.

The world’s major central banks are rushing to ramp up rates to dampen red-hot global consumer prices, but traders fear rising borrowing costs will herald recession.

Switzerland and Norway sprang hefty interest rate hikes on Thursday, mirroring this week’s big rises in Sweden and the United States.

In Asia, Indonesia and the Philippines also tightened monetary policy but the BoJ left its status quo in place.

While the Fed’s 0.75-percentage-point rise was widely expected, there was some surprise at the central bank’s forecast that borrowing costs would likely be held above four percent throughout next year.

Powell reiterated his determination to focus on bringing down inflation — which is at a four-decade high — and accepted that the campaign would hit Americans hard.

– No ‘painless way’ –

“We have got to get inflation behind us,” Powell said after the decision.

“I wish there were a painless way to do that. There isn’t.”

He added that “the historical record cautions strongly against prematurely loosening policy” and the Fed would “keep at it until the job is done”.

In reaction, Wall Street tumbled as traders contemplated an era of higher-for-longer rates, which could hit companies’ bottom lines.

Asia followed suit, with Hong Kong down at an 11-year low — while Tokyo, Shanghai, Seoul, Singapore, Mumbai, Taipei and Manila also down.

The Fed has for months tried to walk a fine line between fighting soaring prices and trying to keep the economy from contracting, but officials accept the chances of success are narrow.

“With the new rate projections, the Fed is engineering a hard landing — a soft landing is almost out of the question,” said Seema Shah, of Principal Global Investors.

Commentators are now betting on a fourth straight 75-basis-point rate hike at the next Fed meeting in November.

Oil prices extended recent gains after Russian President Vladimir Putin’s announced a partial mobilisation of the Russian army and a veiled threat to use nuclear weapons against the West.

– Key figures at around 1015 GMT –

London – FTSE 100: DOWN 0.4 percent at 7,211.71 points

Frankfurt – DAX: DOWN 0.7 percent at 12,680.86

Paris – CAC 40: DOWN 0.8 percent at 5,985.64

EURO STOXX 50: DOWN 0.7 percent at 3,468.83

Tokyo – Nikkei 225: DOWN 0.6 percent at 27,153,83 (close)

Hong Kong – Hang Seng Index: DOWN 1.6 percent at 18,147.95 (close)

Shanghai – Composite: DOWN 0.3 percent at 3,108.91 (close)

New York – Dow: DOWN 1.7 percent at 30,183.78 (close)

Pound/dollar: UP at $1.1332 from $1.1270 Wednesday

Euro/dollar: UP at $0.9875 from $0.9837

Euro/pound: DOWN at 87.14 pence from 87.29 pence 

Dollar/yen: DOWN at 142.50 yen from 144.06 yen

Brent North Sea crude: UP 1.0 percent at $90.76 per barrel

West Texas Intermediate: UP 1.2 percent at $83.89 per barrel

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The Swiss and Norwegian central banks announced hefty interest rate hikes on Thursday as global monetary policymakers ramp up the battle against runaway inflation.

The moves follow big rate rises in Sweden and the United States this week and come ahead of another increase expected to be announced by the Bank of England on Thursday.

Norway’s central bank raised its rate to its highest level since 2011 while the Swiss National Bank ended its negative-rate era.

The Swiss central bank raised its policy rate by 0.75 percentage points to 0.5 percent.

The SNB, which first pushed its rates down into negative territory in January 2015, said the move was needed to counter “the renewed rise in inflationary pressure and the spread of inflation to goods and services that have so far been less affected”.

It said the change would take effect on Friday, adding, “It cannot be ruled out that further increases in the SNB policy rate will be necessary to ensure price stability over the medium term.”

The central bank also said it was “willing to be active in the foreign exchange market as necessary… to provide appropriate monetary conditions”.

The negative rate meant that depositors had to pay to park their money at the bank.

The SNB, which in June hiked its interest rate for the first time in 15 years, has joined a global tightening of monetary policy to tame soaring prices.

Inflation began to rise worldwide as economies emerged from Covid lockdowns, and it worsened as energy and food prices skyrocketed after Russia invaded Ukraine in late February.

Inflation in Switzerland rose 3.5 percent in August and is “likely to remain at an elevated level for the time being”, it said.

“The latest rise in inflation is principally due to higher prices for goods, especially energy and food,” it added.

Given the new rate hike, which should rein in price hikes, the bank said it now forecasts that inflation should gradually decline to three percent for the full year 2022, 2.4 percent for 2023 and 1.7 percent for 2024.

“Without today’s SNB policy rate increase, the inflation forecast would be significantly higher,” it said.

The tightening of monetary policy worldwide has caused stock markets to drop as investors fear that the rising rates could spark a recession.

– More hikes elsewhere –

Norway’s central bank lifted its policy rate by 0.5 percentage points to 2.25 percent and warned that it would “most likely” be raised further in November.

“Inflation has risen rapidly over the past months and has been far higher than projected,” Norges Bank said in a statement.

“The labour market is tight but there are now clear signs of a cooling economy,” it said.

Inflation reached 6.5 percent in August, more than triple the central bank’s two-percent target.

“There are prospects that inflation will remain high for longer than projected earlier,” said Norges Bank governor Ida Wolden Bache.

The Swedish central bank surprised markets on Tuesday with a supersized 1.0-percentage-point hike.

The US Federal Reserve rolled out a third consecutive 0.75-percentage-point increase on Thursday, with chairman Jerome Powell saying there was no “painless” way to bring down inflation.

The Bank of England was forecast to lift its key rate by 0.5 percentage points to 2.25 percent later on Thursday, repeating an increase in August that had been the biggest rise since 1995.

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