ALEX BRUMMER: Fed does a reverse ferret on money printing

Transitory – the term used to describe inflation as the world emerged from lockdowns – has been consigned to the dustbin of history.

In his first evidence to Congress since being renominated as Federal Reserve chairman, Jay Powell acknowledged that it was time to ‘retire’ the word.

America’s inflation rate climbed to 6.2 per cent in October, leading the US central bank to conclude it should bring an end to its money-printing programme.

Turnaround: In his first evidence to Congress since being re-nominated as Federal Reserve chairman, Jay Powell acknowledged that it was time to ‘retire’ the word ‘transitory’

Until now, it has been assumed that the rise in consumer prices largely has been driven by temporary supply-side issues.

The Fed is now acknowledging that something more serious is afoot and higher prices and the hardship imposed on consumers are too persistent for comfort.

If ending the monetary largesse is going to be difficult for the US, where employment and growth have been rising, it is going to be even harder for the European Central Bank. 

Across the 19 countries of the eurozone, consumer prices climbed by 4.9 per cent in November.

In the anchor economy of Germany, they jumped by 6 per cent, the highest number since unification three decades ago. 

Erosion of Bundesbank influence at the European Central Bank and the focus of its president, Christine Lagarde, on Covid recovery leaves the region in a difficult place as it seeks to balance prices against jobs.

Germany is particularly hurt by rising gas prices, with much of its power imported from Russia.

The only saving grace of the Omicron variant here in the UK is that it might restrain the Bank of England from a precipitate rise in bank rate from its lowly 0.1 per cent at its December meeting.

Those unfashionable economists who predicted that US, European and British money creation could result in a prices nightmare could yet be vindicated.

Data banks

Traditional banking has the customers but it is the newcomers making waves.

London is the start-up capital for finance, and fundraisings continue apace. High Street banks are easy to disrupt, if not to displace. 

Incumbents are lumbered with legacy IT, expensive branches and rely upon oligopolistic intermediaries to get things done. 

As was seen when Amazon took umbrage at Visa over commission charges, even big brands can be challenged.

Seeking to fill the gap in clearing transactions is the £1billion Bank of London, headed by Barclays refugee Anthony Watson. It will use new tech to speed up clearing and settlement, and protect against cyber fraud.

Wise, one of the few profitable disrupters, has seen its market value zip up to £8billion in spite of sub-octane governance and its founder Kristo Kaarmann being penalised for not submitting a tax return in 2018.

Its overseas currency transfers for a modest price and no hidden turn on the exchange rate has exposed the SWIFT system used by traditional banks as cumbersome and costly.

Over the last year, profits growth stalled as it invested in sorting out ‘frictions’ in its network. What impresses investors is the growth in income, up 33 per cent in the last year.

A corollary of the march of fintech is the way traditional players are having to bear down on costs.

Debbie Crosbie at TSB inherited a modernised, if discredited, IT system when she took the helm at the Catalan-owned bank, as well as an over-ripe branch network.

The axe is coming down again – on 70 branches. TSB boasts that it will still have the seventh-largest branch network in the UK (well out of the Champions League spot). It suggests customers can use the Post Office. 

That is if they dare, after a computer scandal which has been a living hell for people behind the counters.

Branches are a big point of difference for established banks and a chance for customers to engage directly with their savings at a time when they sit on unusually large deposits. 

Losing that advantage is not only a blow for clients but hands an opportunity to the upstarts.

Flower power

Glencore is the latest mining target for the activists.

Bluebell Capital wants chief executive Gary Nagle to hive off thermal coal, contrary to company policy of running down production in a climate-friendly way rather than selling to less transparent owners.

Glencore should tell Bluebell to plant its seeds elsewhere.

This post first appeared on Dailymail.co.uk