Inflation slips
Four-year low
Inflation in the UK drifted lower again in February, settling at a four-year low point of 1.7 per cent, as measured by the consumer prices index (CPI). The main driver of the fall was a reduction in the average price of a litre of petrol compared with a significant rise in petrol in the corresponding period a year ago, while energy bills did not rise as sharply as during the same period in 2013. The slip further below the 2 per cent target level means the Bank of England is under no pressure whatsoever to increase interest rates until it is convinced that the economic recovery is suitably entrenched. It also relieves some pressure from household budgets given that average wage growth has almost caught up with inflation.
Mail malaise
Strike fear
The Royal Mail has invited a potential conflict with the unions after revealing plans to axe 1,300 jobs. Just months after floating, and averting potential Christmas industrial action through an agreement with unions in December, the company has said that the continuation of its efficiency programme will mean the loss of 1,600 jobs primarily in its head office and management functions, with 300 jobs created. The reorganisation is expected to cost up to £100m, but should save the business £50m a year in future.
Backlash
Russian outflows surge
Russia is bracing itself for a record outflow of funds as the US and other western nations apply sanctions against individuals and businesses associated with the Russian ruling elite in retaliation for the rapid annexation of the Crimean region of Ukraine in the past week. Russian government figures have estimated that the country could see capital outflows worth $70bn (£42bn) in the first three months of this year, surpassing the $63bn of outflows recorded in the whole of 2013. In a further blow to Russia, economists have tempered growth forecasts for this year, with some indicating that the country could fall back into recession before 2014 is out.
Euroboost
QE coming?
The European Central Bank could yet launch a radical programme of quantitative easing aimed at averting the economic bloc's slide into a deflationary low-growth death spiral. This view was espoused by Jens Weidmann, head of Germany's Bundesbank, this week in a clear sign that the continent's powerhouse is potentially supportive of more radical action to shock the eurozone back into life. Speaking after news that deflation has worsened in Spain and business confidence in Germany has dipped for the first time in five months, Mr Weidmann - who also serves on the ECB governing council - hinted that German attitudes to QE, which have previously been against the idea, might be softening.
Lloyds stake sale
Government sells
The government has offloaded yet more of its stake in Lloyds Banking (LLOY) in a rapid fire institutions-only placing overnight Tuesday. The government sold a little less than 8 per cent of the group at 75.5p a share, raising £4.2bn in the process and reducing its holding from 32.7 per cent to 24.9 per cent. The news came as a blow to those who were hoping that the government might allow the public to participate in the second tranche of Lloyds' shares to be sold, but it does raise the prospect of further sales, with a retail element, before the general election in May 2015.
Power freeze
SSE acts
In the face of continued political pressure on the 'Big Six' energy companies to ease the burden on consumers, SSE this week announced that it will freeze its prices until at least January 2016. The pledge is being funded by a number of initiatives, including a £100m cost-saving programme that will involve the loss of around 500 jobs. SSE is also scaling back its investment plans for renewable energy projects and splitting its wholesale and retail divisions, while also targeting asset disposals.
