‘Delicate Equilibrium’ as world economy slows

Bank of England’s Carney sees ‘delicate equilibrium’ as world economy slows

Global economic growth is likely to stabilise at a new, slower pace, although China, trade wars and rising protectionism threaten the “delicate equilibrium”, Bank of England Governor Mark Carney said.
He pointed to a shift towards tighter financial conditions from rising in interest rates, as well as trade tensions, as reasons for the recent slowdown in the world economy.
Rising debt in China and new barriers to global trade were a “significant and growing” risk to the global outlook for growth, and protectionism was already having an impact, Carney said in a speech at a Financial Times event on Tuesday.
“Given the confluence of the current broad-based slowdown and outstanding downside risks, some are beginning to wonder whether the global expansion, begun in 2010, could be starting to end,” Carney said.
“While there are pockets of risk and global growth is still decelerating, the combination of the policy response and the state of the current imbalances in advanced economies suggest that global growth is more likely than not to stabilise eventually around its new, modest trend.”
“But this is a judgement, not a guarantee. The world is in a delicate equilibrium.”
Carney added that “it isn’t easy to win a trade war”, referring to remarks made by US President Donald Trump in March last year that trade wars were “good, and easy to win”.
On Brexit, Carney said it was in everyone’s interests to find a solution that works for all in the weeks ahead.
“In many respects, Brexit is the first test of a new global order and could prove the acid test of whether a way can be found to broaden the benefits of openness while enhancing democratic accountability,” Carney said.
The United Kingdom is on course to leave the European Union on March 29 without a deal unless May can convince the bloc to a mend the divorce deal she agreed in November and then sell it to sceptical British lawmakers.

 

Britain’s ‘broken’ cash system needs overhaul

 Britain’s system for cash is “broken” and needs a fundamental rethink to avoid vulnerable people being cut off, lawmakers and regulators said on Tuesday.
Lawmakers are concerned that free-to-use cash machines or ATMs in rural areas are being closed as falling demand for notes make them uneconomic, leaving customers isolated.
“The national system for people to have access to their cash via machines is basically broken,” said Nicky Morgan, chair of parliament’s Treasury Select Committee.
Currently banks effectively subsidise uneconomic cash machines through the “interchange” fee set by Link.
The Payment Systems Regulator and Link locked horns last year over closures of “protected” or uneconomic cash machines, and Link’s plan to cut the interchange fee in phases.
“We have agreed the whole system needs to be looked at afresh,” PSR Chair, Charles Randell, told the committee.
Regulators could “hold the line” for now, but the demand for cash may decline even faster as people switch to contactless payments, Randell said.
This raised the question of whether future subsidies could still come from the commercial sector, or if some cash machines should be a “universal” service funded by the public, Randell said.
The banking sector has already back-tracked on plans to ditch cheques, and faces lawmaker ire over branch closures.
Separately, consumer campaign group Which? said that 3,000 cash machines vanished from Britain’s streets in the last six months of 2018, and called on the government to set up a new regulator to oversee cash.
There were still over 60,000 ATMs in Britain at the end of last year, Which said.
UK Finance, which represents banks, said lenders were investing in the cash machine network to ensure continuity of service when ATMs are no longer commercially viable to operate.
PSR Chief Executive Hannah Nixon told lawmakers the watchdog has been clear to Link that it must maintain interchange fees at a level that keeps ATMs in remote areas open.
Nixon, who is standing down this year, said there was now a process in place to head off closures of protected ATMs, and that cash and cheques were here to stay as long as people wanted them.
The payments system was “as ready as it could be” in the event of Britain leaving the European Union next month with no transition deal, Nixon said.
But there was no clarity on whether it would become more expensive for people travelling in the EU to use their payment cards if there was no Brexit deal, Randell said.