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Bank of England chief economist hints at summer rate cut; Tesco CEO’s pay doubles to nearly £10m– as it happened

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BoE’s Pill: Not unreasonable that we could consider rate cuts this summer

The Bank of England’s chief economist has said it is “not unreasonable” to think the central bank could consider cutting interest rates over the summer, Reuters reports.

This has knocked the pound, which is down almost half a cent this morning at $1.252.

Huw Pill told an online presentation organised by accountancy body ICAEW that if inflation continues to look less persistent, the Bank could consider lowering Bank Rate.

He says:

“I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.”

Pill also explained that the UK’s labour market remains tight by historical standards, despite this morning’s rise in unemployment and the gradual slowdown in pay growth.

He said:

“There has been an easing of the labour market but it still remains pretty tight by historical standards.”

Pill also pointed to the slowdown in private sector pay growth in this morning’s data (to 5.9%, see here), saying:

“We actually got some additional data this morning that would be consistent with a small additional decline in the first quarter.”

PIll was one of seven MPC members who voted to keep interest rates on hold last week, while just two policymakers voted to cut.

Following his comments today, the momney markets now indicate there is a 53% chance of a rate cut at the BoE’s next meeting in June, up from around 50% earlier today.

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Key events

Closing summary

Time to wrap up

The chief executive of Britain’s largest supermarket, Tesco, more than doubled his pay package to nearly £10m last year.

Ken Murphy received £9.93m during Tesco’s last financial year, up from £4.44m a year earlier.

Much of the increase was due to a Performance Share Plan (PSP) payout of £4.91m.

Tesco said the PSP payout reflected “strong performance against stretching targets over a challenging period.”

But the High Pay Centre said Murphy’s huge pay packet illustrated how the UK economy serves the interests of the super rich at the expense of everybody else.

The Unite union accused Tesco of giving struggling workers a “slap in the face”.

Details of Murphy’s pay were released on a day when UK unemployment rose to 4.3%, as firms cut back on staff.

But regular pay, which strips out bonuses, was unchanged, recording growth of 6%, meaning real wages continued to grow.

The Bank of England’s chief economist Huw Pill suggested that the BoE may be able to consider cutting interest rates this summer.

He told an online presentation organised by the ICAEW, an accountancy body, that:

“I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.”

The money markets suggest that there’s an even change of a cut, or no change, at the Bank’s June meeting.

Elsewhere today, Kremlin critic and anti-corruption campaigner Bill Browder has urged MPs to introduce a US-style law that would allow the government to confiscate frozen Russian assets to support military efforts in Ukraine.

Browder told the Treasury Committee that using around $300bn of frozen Russian assets to support Ukraine could “change the whole nature of the war”, and act as an insurance policy in case Donald Trump wins the US presidency and cuts support for Kyiv.

Browder also named refineries in India, Turkey and China which he claimed were processing Russian oil and selling refined products to the West.

US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.

The global carmaker Stellantis is to sell cheap electric cars made by its Chinese partner Leapmotor in Europe, including the UK, as it criticised Joe Biden’s decision to impose a 100% tariff on Chinese EVs imported to the US.

Spending on the NHS in England has risen less quickly than the Conservatives promised at the last election despite the extra demand created by the pandemic and record waiting lists, a leading thinktank has said.

Anglo American plans to sell the diamond business De Beers as part of a sweeping plan to break up the company to defend it against a £34bn takeover plot by its rival BHP.

But there are concerns that cuts to spending at its Woodsmith fertilizer mine in the North York Moors National Park could lead to job losses.

Vodafone has said its turnaround plan is starting to show results as Germany, its largest business, returned to growth last year after the sale of its Italian and Spanish operations.

Ofgem could allow energy suppliers to once more vie for new customers by offering them cheaper deals than existing policyholders receive, under proposals to reignite competition in the market.

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Callum Jones

Ken Murphy’s pay packet isn’t the only thing that has doubled.

Over on Wall Street, the meme stock fever is in full cry.

Shares in electronics retailer GameStop jumped by around 100%, before sliding a little, while cinema chain AMC Entertainment are up 90% in early New York trading.

Retail traders’ interest in GameStop, the struggling video games chain, has been reignited by the re-emergence of an influencer known as Roaring Kitty.

Earlier this week Keith Gill, the influencer known as Roaring Kitty, posted on X for the first time since the height of the meme stock frenzy in 2021. He shared a sketch of a gamer leaning forward, as if things were getting serious – and followed up with a string of clips from movies and TV shows.

Three years ago Gill’s videos on YouTube, and posts on Reddit, where he is known as DeepFuckingValue, placed him at the front of an army of meme-toting day traders who tried to mount a rebellion against Wall Street – and the financial titans dominating the market.

More here.

Tesco CEO Ken Murphy’s £10m pay packet for last year shows that the UK’s economic model serves the super-rich at the expense of everybody else, says Luke Hildyard, Executive Director of the High Pay Centre.

Hildyard is concerned by the “extreme disparity” between the CEO’s pay and the pay of Tesco’s workers.

Murphy’s pay is 447 times greater than a full time Tesco worker at the lower quartile of the workforce and 431 times greater than the median Tesco employee, as this chart from today’s annual report shows:

Photograph: Tesco

Hildyard says this is one of the worst pay gaps on record:

“This is the third highest gap between the CEO of any firm and their typical employee recorded since pay ratio reporting began five years ago.

You couldn’t really get a better indicator of how the UK economy serves the interests of the super rich at the expense of everybody else than this – a multi-millionaire Chief Executive trousering another £10 million while their customers endure major price rises and their employees have to get by on less than a quarter of a percent of what the CEO takes home.”

US PPI inflation hotter than hoped

Back in the economics world, US producer price inflation was hotter than expected last month.

US services companies and manufacturers raised the cost of their goods and services by 0.5% in April, the US Bureau of Labor Statistics reports, following a 0.1% drop in March.

This may potentially discourage the US Federal Reserve from considering cuts to interest rates soon, given concerns that inflation is looking sticky.

Services prices rose by 0.6% in the month, while goods prices were up 0.4%.

On an annual basis, PPI inflation rose to 2.2% for the 12 months to April, up from 1.8% in the year to March. That’s the highest annual reading since April 2023, when PPI was 2.3%/year.

🇺🇸Hotter than expected PPI

🔥Headline #PPI +0.5% m/m in April
📈Core +0.4% m/m

🟡Goods 0.4%
🍲Food -0.7%
⛽️Energy 2.0%
📊Core 0.3%

✅Services 0.6%
⤵️Transport -0.6%
🔥Trade (margins) 0.8%
📈Other 0.6%

📊#Inflation
⬆️PPI 2.2% y/y (+0.3pt)
⬆️Core 3.1% y/y (+0.3pt) pic.twitter.com/suI4peWdlP

— Gregory Daco (@GregDaco) May 14, 2024

Paul Ashworth, chief North America economist at Capital Economics, explains:

The bigger-than-expected 0.5% m/m increases in both all items and core final demand producer prices in April were mainly due to downward revisions to earlier months, with the 0.2% m/m gains in March both revised to 0.1% declines.

As a result, the annual rate of all items final demand PPI inflation only edged up to 2.2%, from 2.1%. That modest increase in the annual headline rate was mainly due to a 5.4% increase in gasoline prices, however, which, with crude oil prices slumping more recently, should be more than reversed in May.

Ken Murphy has surged near to the top of the list of best paid FTSE 100 CEOs, with his £10m pay packet for last year.

He’s not at the top, though.

AstraZeneca’s chief executive, Pascal Soriot, received a pay package of nearly £17m last year, and could be paid £18.7m this year.

Another pharmaceuticals boss, Emma Walmsley of GlaxoSmithKline, received a 50% rise last year, taking her annual pay packet to £12.7m.

Back in March, The Observer reported that median pay for the companies listed on the pan-European Stoxx 600 index, which includes the biggest UK companies, was €3.5m (£2.9m) in 2022.

Ken Murphy actually only received 95% of his potential annual bonus for last year.

He missed out on the maximum award, because a target of reducing food waste by 47% was missed.

That meant Murphy received £3.377m, out of a maximum of £3.555m (250% of his basic pay).

Photograph: Tesco

Ken Murphy’s whopping pay packet of £9.9m for last year works out at an equally jaw-dropping £190,000 per week.

That’s the amount you might pay a top-class Premiership footballer for a week – or more than five times the annual pay for an NHS nurse.

Can anyone, really, be worth £10m per year, just for running a supermarket?

The Sunday Times reported last month that some analysts argue the £10 million man is worth every penny, after steering Tesco through a pandemic, then raised its market share during a cost of living crisis.

Richard Hyman, of Thought Provoking Consulting, told them:

“He’s done a terrific job. Ken has unashamedly focused on the thing Tesco is really good at: mass market grocery retailing.

Tesco’s supermarkets have fewer bells and whistles these days, but they are far more reliable on product availability, price and value… and that’s fundamental.”

Tesco have confirmed chief exec Ken Murphy was paid just shy of £10 million last year — an unprecedented sum for a supermarket boss in the UK.

Here’s our write-up from a few weeks back:https://t.co/t0Xc1B03uk

— Sam Chambers (@SamChambersDMC) May 14, 2024

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Tesco CEO’s pay doubles to nearly £10m

Tesco’s CEO Ken Murphy needn’t fret about the cost of living squeeze, it seems, after more than doubling his pay last year to almost £10m.

Murphy was paid £9.9m in the last financial year, up from £4.4m in 2022/2023.

Tesco’s 2024 annual report, just released, shows that Murphy’s basic pay rose by 3% to £1.41m. He also received an annual bonus of £3.38m, up from £2.73m last year.

Murphy’s pay packet was further swelled by a £4.91m payout from Tesco’s Performance Share Plan (PSP). This award is paid in Tesco shares, and are based on performance since 2021.

Britain’s largest supermarket chain says:

The significant year-on-year increase in remuneration primarily reflects the first vesting from these awards, which themselves reflect strong performance against stretching targets over a challenging period.

That challenging period covers a time in which many familes struggled to put food on the table, as grocery and energy prices soared – which means Murphy’s pay packet may prove controversial.

CFO Imran Nawaz’s annual remuneration also more than doubled, to £4.95m from £2.27m.

A chart showing Tesco’s CEO and CFO Photograph: Tesco

Tesco says:

A large proportion of the total package has been achieved thanks to both Ken Murphy and Imran Nawaz achieving stretching targets in a highly competitive sector and working to create value for customers, colleagues, suppliers, communities and shareholders.

Tesco adds that it “remains committed to a competitive and fair reward package for all colleagues”, and spent £300m on a pay rise for its hourly-paid staff.

Tesco boss Ken Murphy has been paid £9.9 million for last year.

A big boost from the £4.4 million the year before and 447 TIMES the average lowest paid Tesco worker on £22,000 a year.

— Ashley Armstrong (@AArmstrong_says) May 14, 2024

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In the economic world, there are glimmers of optimism in America and the eurozone today.

US small-business confidence increased last month, despite firms struggling with a shortage of workers, according to the National Federation of Independent Business (NFIB).

NFIB’s Small Business Optimism Index rose by 1.2 points to 89.7 for April, having slid to an 11-year low in March.

Encouragingly for consumers, the share of owners planning to raise prices was the smallest in a year

Bill Dunkelberg, NFIB chief economist, says:

“Cost pressures remain the top issue for small business owners, including historically high levels of owners raising compensation to keep and attract employees.”

Meanwhile in Germany, investor morale has improved by more than expected in May.

The ZEW economic research institute’s economic sentiment index jumped to 47.1 points from 42.9 points in April, higher than expected.

Bill Browder names refineries processing Russian oil

Bill Browder has also named the oil refineries which are taking Russian oil, refining it, and setting the products to the West.

Browder suggests that such refineries could be sanctioned, or legislation could be passed to block sales from these sites.

He then names them on the record, for the Treasury Committee.

In India, they are the Vadinar Refinery, which is 49% owned by Russia’s state oil company, Rosneft, the Jamnagar Refinery in the Gulf of Kutch, on India’s western coast, and state-owned companies Bharat Petroleum and Hindustan Petroleum.

In Turkey, he names STAR Rafineri which stuck a deal with Russia’s Lukoil.

And in China, he names Sinopec Group and CNOOC (China National Offshore Oil Corporation).

Browder adds:

Those are alll companies who buy Russian oil. When we talk about India, China and Turkey we’re talking about specific companies.

We don’t need to sanction India, China and Turkey, we can just go after the companies that are buying the oil.

He urges MPs to put these names into their report into Russian sanctions, as this would add to the pressure on these companies. If Russia can’t find a market for its oil, then the price will go down, and Moscow will have less money to fund its war with Ukraine.

Bill Browder names refineries that are refining Russian oil & then selling it back to us.

He calls for these refineries to be sanctioned or for legislation to be created so we’re not allowed to buy oil from these refineries. pic.twitter.com/UuimFurB1N

— Haggis_UK 🇬🇧 🇪🇺 (@Haggis_UK) May 14, 2024

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Browder: UK should pass REPO Act to ease confiscation of Russian assets

Bill Browder then urges MPs to copy the US, and pass a law to remove any ambiguity over whether frozen Russian assets can be confiscated, and used to fund Ukraine.

That REPO Act was passed with the $61bn aid package which was approved by Congress last month.

Browder tells the Treasury Committee today:

What I would suggest is done here is some version of the REPO Act, where – to the extent that there’s any legal concern – you legislate away that legal concern so that it can be properly done here.

If the US and the UK both approved such legislation, it would put more pressure on the European Union to “do the right thing in the end”, Browder explains.

The European Union’s proposal of using windfall profits from frozen Russian assets to finance arms supplies to Kyiv, rather than the assets themselves, is “a typical EU bad compromise”, he adds.

Browder argues there’s no difference between taking the profits and simply taking all the money, so the EU’s plan is a “fudge” that will prolong the inevitable.

Browder: Using Russian assets to fund Ukraine would “change whole nature of the war”

Western governments should use the seized Russian assets they control to fund the war in Ukraine, as an ‘insurance policy’ in case Donald Trump wins the US presidential election, MPs have been told.

Financier and political activist Bill Browder explained to the Treasury Committee this morning that it would “change the whole nature of the war” if the West were to confiscate $300bn of assets from Russia.

Browder, who set up the Magnitsky Campaign after his lawyer, Sergei Magnitsky, died in custody in Russia in 2009, explains to MPs that the Russia-Ukraine conflict is a “resource war”.

Currently Russia has more resources than Ukraine, and Putin is “banking” on the West having less appetite for the war than him, as it drags on, Browder explains.

Browder cites the delays getting Ukraine funding approved by the US House of Representatives this year, saying:

If this money were to be confiscated, it is five times the $65bn that the US had been dragging their feet on.

It would completely change the situation… in a context where we’re almost two and a half years into this war, and whether we like it or not, some of our allies are going to be less likely to fund this war.

Browder says he is “particularly concerned” about what might happen in the US, where Donald Trump is leading in the swing states. Trump has made it very clear that he would end the war in 24 hours – by stopping funding Ukraine.

Currently, the US provides half the funding for Ukraine, so either Ukraine loses war or “we have to double down”, explains Browder.

This money, this three hundred billion, would solve that problem. It would basically be an insurance policy against that problem.

Britain has been ramping up pressure on western governments to use frozen Russian assets to help rebuild Ukraine’s war-shattered economy.

In January, foreign secretary David Cameron told the World Economic Forum in Davos that there were legal, moral and political justifications for action.

The EU, though, is favouring using only the profits from those assets to help Ukraine.

Browder adds that he doesn’t think confiscating Russian assets would have any impact on the markets, rejecting claims that it would destabilise the markets.

He also suggests it could deter China from attacking Taiwan, telling MPs:

It would sent a message that if you launch an unprovoked war of aggression, you’re likely to have your foreign exchange reserves confiscated.

He adds that the cost of supporting Ukraine will fall on taxpayers, unless politicians take the plunge and use Russian frozen assets instead.

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Bill Browder: Sanctions are crippling Russia, but oil is a “big, big” loophole

Anti-corruption campaigner and Kremlin critic Bill Browder has told MPs not to be fooled by claims from Moscow that sanctions aren’t working.

Testifying to the Treasury committee this morning, Browder explains that president Putin has claimed several times that sanctions introduced after the invasion of Ukriane aren’t working.

Putin argues that the Russian economy is doing well, so the West should stop hurting themselves with sanctions on trade with Russia.

Browder, though, smells a rat, telling MPs:

Sanctions are crippling Russia.

The numbers that you receive about the ‘success’ of the Russian economy….the Russian state statistics committee produces those numbers. The Russians lie in every other area, I don’t see any reason why we should believe those numbers coming out of Russia.

[Reminder: Rosstat has reported that Russia’s economy contracted by just 1.2% in 2022, the first year of the Ukraine war].

Browder reminds MPs of the measures taken against Ukraine:

  • Western governments froze around $300bn of central bank reserves the week after the Ukraine war started

  • The UK have sanctioned 57 of the 98 oligarchs who are listed as influencial by the US, meaning their money is effectively imobilised.

  • The foreign borrowing of Russian companies and government has been curtailed

  • 1,500 Western companies have retreated from Russia

  • There’s been an $80bn swing in foreign direct investment, from +$40bn of FDI before war, to -$40bn now.

But the “big, big loophole” is the sale of oil, Browder continues; oil which Russia used to sell to the West is now being sold to India, China and Turkey.

This presents two problems.

First, Russia continues to get a lot of money from that oil – beween half a billion and a billion dollars per day.

Second, the oil is being processed in refineries in India, China and Turkey, and returned to the West as refined oil products.

Browder estimates that $23bn of refined oil products is being sold back to the EU, and the UK bought $2.2bn of that refined product last year.

He tells the Treasury Committee:

As long as Russia can sell the oil, Russia can use that hard currency to buy weapons, and they can use those weapons to kill Ukrainians.

This means the West are funding both sides of the war, Browder explains, meaning something has to give.

What Putin is hoping is going to give, is that we’re going to run out of patience the fund the Ukrainians.

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Phillip Inman

China might feel like a victim of heavy-handed US action today, but shouldn’t think the 100% tariffs on its electric cars are anything new, my colleague Phillip Inman explains.

In the 1980s president Ronald Reagan imposed 100% tariffs on billions of pounds (in today’s money) of Japanese imports after years of beligerent protests from an increasingly protectionist Washington administration.

Japanese car makers reacted by relocating factories inside the US, while the Tokyo government bottled up whatever anger it had to preserve good relations with its military protector.

Economic historians have noted that it mainly benefited Korean car makers rather than US car workers. Korean firms like Hyundai began to make headway in the US market under the radar.

China has found a way round existing tariffs by sending goods via Mexico, which has seen a boom in exports to the US. So a clampdown on this new trade route is possible in the near future.

The sweeping tariffs on Chinese electrical goods announced by the White JHouse a few minutes ago will impact around $18bn of imports, Bloomberg has calculated.

Biden hikes tariffs on Chinese EV cars, chips and solar cells

Larry Elliott

Larry Elliott

NEWSFLASH: The US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.

In a move that is likely to inflame trade tensions between the world’s two biggest economies, the White House said it was imposing more stringent curbs on Chinese goods worth $18bn.

Sources said the move followed a four-year review and was a preventive measure designed to stop cheap subsidised Chinese goods flooding the US market and stifling the growth of the American green technology sector.

As well as a tariff increase from 25% to 100% on EVs, levies will rise from 7.5% to 25% on lithium batteries, from zero to 25% on critical minerals, from 25% to 50% on solar cells, and from 25% to 50% on semiconductors.

Here’s the full story:

Anglo American to slash investment in Woodsmith fertiliser mine amid break-up plan

There are fears of job cuts at the Woodsmith fertilizer mine in the North York Moors National Park, as owner Anglo American announces details of a plan to break itself up.

Fresh from rejecting a takeover approach from rival BHP Group, Anglo has revealed a series of sweeping changes this morning, which will refocus its on copper and premium iron.

The plan includes

  1. Demerging its Anglo American Platinum division – something which BHP pushed for its takeover proposal

  2. Selling or demerging its diamond operation, De Beers

  3. Selling its Steelmaking Coal operations

  4. Slowing the development of the Woodsmith project to support Anglo American’s balance sheet deleveraging.

💎Diamonds are not forever… @AngloAmerican plans to spin off its highly prized @DeBeers diamond unit as part of a sweeping restructuring of its 107-year-old business as it seeks to fend off persistent takeover bids from mining rival @bhp Group https://t.co/bpBQ5Y99uz

— Karen Gilchrist (@_karengilchrist) May 14, 2024

Anglo is proposing to slash capital expenditure at Woodsmith to zero in 2026, down from $200m in 2025.

Simon Clarke, Conservative MP for Middlesbrough South and East Cleveland, fears the plan will “clearly have significant implications for the dedicated workforce” at Woodsmith.

I know a number of constituents will be very concerned by the bad news coming out of Anglo American this morning ⬇️ – so am I.

They have set out their intention to slow down the pace of their Woodsmith Mine development dramatically. (1/) pic.twitter.com/9nHIjbuVB7

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

This will clearly have significant implications for the dedicated workforce, who are my number one priority here.

I met the company last week (pictured) to discuss the potential BHP Billiton takeover bid – now rejected. (2/) pic.twitter.com/lYsME6RugG

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

There was however no hint on my call with Anglo of any intention on their part to change their own plans for Woodsmith and today’s news therefore comes as a very unwelcome surprise. (3/)

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

I appreciate any such decision is inherently market sensitive and hence can only be released to the stock market first, but this is a major blow.

I will seek a fresh meeting with Anglo as soon as possible and will update you with all further information I can share. (4/4)

— Simon Clarke MP (@SimonClarkeMP) May 14, 2024

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Full story: UK real pay grows at fastest rate in two years

Larry Elliott

Larry Elliott

The level of real pay for UK workers is rising at its fastest rate in more than two years despite a cooling of the labour market that has led to rising unemployment and falling job vacancies, the latest official figures show.

Fresh data from the Office for National Statistics showed the mild recession in the second half of 2023 has had an impact on demand for workers but has been slower to affect wages.

The ONS said unemployment rose by 166,000 between the final three months of 2023 and the first three months of 2024, pushing up the jobless rate from 3.8% to 4.3%.

More here.

BoE’s Pill: Not unreasonable that we could consider rate cuts this summer

The Bank of England’s chief economist has said it is “not unreasonable” to think the central bank could consider cutting interest rates over the summer, Reuters reports.

This has knocked the pound, which is down almost half a cent this morning at $1.252.

Huw Pill told an online presentation organised by accountancy body ICAEW that if inflation continues to look less persistent, the Bank could consider lowering Bank Rate.

He says:

“I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.”

Pill also explained that the UK’s labour market remains tight by historical standards, despite this morning’s rise in unemployment and the gradual slowdown in pay growth.

He said:

“There has been an easing of the labour market but it still remains pretty tight by historical standards.”

Pill also pointed to the slowdown in private sector pay growth in this morning’s data (to 5.9%, see here), saying:

“We actually got some additional data this morning that would be consistent with a small additional decline in the first quarter.”

PIll was one of seven MPC members who voted to keep interest rates on hold last week, while just two policymakers voted to cut.

Following his comments today, the momney markets now indicate there is a 53% chance of a rate cut at the BoE’s next meeting in June, up from around 50% earlier today.

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