Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
With the UK’s cost of living crisis worsening, energy regulator Ofgem is proposing to adjust the price cap on bills twice as frequently, to address the volatility in the market.
A day after British households were hit with the news that average bills will rise by nearly £700, Ofgem kicked off a consultation on a proposal to switch from half-yearly to quarterly price cap updates.
Currently, the cap on what suppliers can charge only increases every six months.
Jonathan Brearley, CEO of Ofgem, told Radio 4’s Today Programme.
We have seen an extraordinary event in the energy market over the last few months. Something that’s a one in 30-year event.
We’ve seen volatility and change in prices far above what has been expected and what is historical.
That volatility led to a flurry of companies collapse since last summer, as they couldn’t pass on the jump in wholesale electricity and gas prices to consumers.
Having hiked the price cap by 54% on Thursday, Brearley is now looking to the future, warning that the UK’s regulatory package needs to change.
The difficult news for all of us is that this volatile market might be with us for some time.
Adjusting the price cap more frequently means when price go up, the cap goes up — meaning households would be hit earlier by changes in the wholesale market.
But when prices come back down again, so would the cap, Brearley argues.
And in the long-term, the real way for the country to escape this volatility is to diversify its energy sources and push harder on getting to net zero target.
The energy price crunch prompted chancellor Rishi Sunak to announce yesterday that 28 million electricity customers will have £200 knocked off their bills in October.
But the money must be repaid in £40 annual instalments over the next five years, and has been criticised as a “ buy now pay later” scheme.
Council tax payers in England in bands A to D will receive a rebate of £150 from their bills in April, which will not have to be paid back, while separate sums have been set aside for devolved governments in Scotland, Wales and Northern Ireland.
Yesterday, the Bank of England warned that UK households face the worst squeeze on their disposable incomes for at least 30 years, with real post-tax labour income expected to shrink by 2% this year.
With inflation rising to 7.5 per cent, taxes increasing in April, economic growth slowing and unemployment rising, the economic outlook is darkening…. with Thursday’s rise in UK interest rates adding to pressure on borrowers.
Also coming up today
The latest US jobs report is expected to show a sharp slowdown in hiring at America’s firms last month, due to the surge in Omicron cases and a slowdown at businesses. Economists predict employment in January slowed to a crawl, or possible even turned negative.
Adam Cole of RBC Capital Markets explains:
The median expectation for the headline change in payrolls is +150K, but the real expectation is almost certainly much weaker than this.
After a very weak private payroll report this week, and comments from several Federal Reserve officials that the employment report could be an outlier, market expectations may now be centred on a negative headline number, Cole says.
European stock markets are set to open higher, after Amazon beat profit expectations last night, and announced it will hike the price of its Prime service in the US as it passes on higher shipping and wage costs.
Amazon shares jumped in after-hours trading, shortly after Facebook parent company Meta posted the biggest one-day loss in history for a US company, with more than $230bn wiped off its value after disappointing results
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