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| Version 5 | Version 6 |
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| VW emissions scandal: misconduct, process failure and tolerance of rule-breaking blamed – as it happened | VW emissions scandal: misconduct, process failure and tolerance of rule-breaking blamed – as it happened |
| (about 1 month later) | |
| 2.59pm GMT | 2.59pm GMT |
| 14:59 | 14:59 |
| Closing summary | Closing summary |
| With that, we are closing up for the day. Thank you for all your great comments, and we’ll be back tomorrow. | With that, we are closing up for the day. Thank you for all your great comments, and we’ll be back tomorrow. |
| 2.46pm GMT | 2.46pm GMT |
| 14:46 | 14:46 |
| Here in London, Anglo-African financial firm Old Mutual is the biggest faller on FTSE 100 index. It has slid 11% to 174p after South Africa’s finance minister was sacked, pushing the rand to a record low. | Here in London, Anglo-African financial firm Old Mutual is the biggest faller on FTSE 100 index. It has slid 11% to 174p after South Africa’s finance minister was sacked, pushing the rand to a record low. |
| South African bank and asset manager Investec is also down, tumbling 11% to 489.8p the worst day for the shares since 2009. | South African bank and asset manager Investec is also down, tumbling 11% to 489.8p the worst day for the shares since 2009. |
| South African president Jacob Zuma ousted finance minister Nhlanhla Nene, sending the rand down 5% to its lowest level ever. | South African president Jacob Zuma ousted finance minister Nhlanhla Nene, sending the rand down 5% to its lowest level ever. |
| Updated | Updated |
| at 2.47pm GMT | at 2.47pm GMT |
| 2.33pm GMT | 2.33pm GMT |
| 14:33 | 14:33 |
| With regard to the Volkswagen emissions-rigging scandal, the carmaker’s management reiterated today that only a small group of employees were responsible. | With regard to the Volkswagen emissions-rigging scandal, the carmaker’s management reiterated today that only a small group of employees were responsible. |
| Despite the scandal, orders so far this year are up 3.5% and chief executive Matthias Müller said he was confident that buyers would overcome their reluctance to buy the group’s cars in coming weeks. The board is still unable to estimate the scandal’s legal costs. | Despite the scandal, orders so far this year are up 3.5% and chief executive Matthias Müller said he was confident that buyers would overcome their reluctance to buy the group’s cars in coming weeks. The board is still unable to estimate the scandal’s legal costs. |
| Lucy Jameson, chief executsive of UK advertising firm Grey London, has sent us her views. | Lucy Jameson, chief executsive of UK advertising firm Grey London, has sent us her views. |
| 1.47pm GMT | 1.47pm GMT |
| 13:47 | 13:47 |
| Back to the Bank of England. Investec’s chief economist Philip Shaw has sent us his thoughts: | Back to the Bank of England. Investec’s chief economist Philip Shaw has sent us his thoughts: |
| Although the minutes once again reported a ‘range of views’ on the committee, an increase in the pace of domestic cost growth will need to be evident before a majority on the MPC is prepared to raise interest rates, particularly bearing in mind the background of subdued international commodity price trends. | Although the minutes once again reported a ‘range of views’ on the committee, an increase in the pace of domestic cost growth will need to be evident before a majority on the MPC is prepared to raise interest rates, particularly bearing in mind the background of subdued international commodity price trends. |
| In this respect we continue to expect the first move to occur in Q2 next year, but we will place a lot of weight on the direction of the wage numbers (note that October’s figures are out next week) and trends in sterling. However although the pound has slipped back recently it remains almost 1% firmer on its trade weighted basket since the inflation report, which is perhaps a reminder that there is no guarantee that the current period of ‘lowflation’ will be shortlived.” | In this respect we continue to expect the first move to occur in Q2 next year, but we will place a lot of weight on the direction of the wage numbers (note that October’s figures are out next week) and trends in sterling. However although the pound has slipped back recently it remains almost 1% firmer on its trade weighted basket since the inflation report, which is perhaps a reminder that there is no guarantee that the current period of ‘lowflation’ will be shortlived.” |
| He noted that as the Christmas lull approaches, the Bank of England’s deputy governor Minouche Shafik is due to speak on monetary policy on Monday, which might cast more light on some of the key issues being considered by the committee. | He noted that as the Christmas lull approaches, the Bank of England’s deputy governor Minouche Shafik is due to speak on monetary policy on Monday, which might cast more light on some of the key issues being considered by the committee. |
| 1.34pm GMT | 1.34pm GMT |
| 13:34 | 13:34 |
| And here is our story on Volkswagen, following this morning’s press conference. My colleague Graham Ruddick writes: | And here is our story on Volkswagen, following this morning’s press conference. My colleague Graham Ruddick writes: |
| Volkswagen has admitted for the first time that the diesel emissions scandal was the result of systematic failures within the company, rather than just the actions of rogue engineers. | Volkswagen has admitted for the first time that the diesel emissions scandal was the result of systematic failures within the company, rather than just the actions of rogue engineers. |
| Hans Dieter Pötsch, the VW chairman, said there had been a “whole chain” of errors at the German carmaker rather than a “one-off”. There was a mindset within the company that tolerated rule-breaking, he said. | Hans Dieter Pötsch, the VW chairman, said there had been a “whole chain” of errors at the German carmaker rather than a “one-off”. There was a mindset within the company that tolerated rule-breaking, he said. |
| 1.20pm GMT | 1.20pm GMT |
| 13:20 | 13:20 |
| The most interesting discussion in the minutes was about the recent slowing in average weekly earnings growth, says Allan Monks, UK economist at JPMorgan. | The most interesting discussion in the minutes was about the recent slowing in average weekly earnings growth, says Allan Monks, UK economist at JPMorgan. |
| The MPC noted the slowdown may reflect the large drop in average hours worked reported at the same time. The MPC also concluded that this source of weaker pay does not affect the outlook for unit wage cost growth and, hence, the inflation outlook. The committee said it would revisit in February the issue of why average hours have dropped. | The MPC noted the slowdown may reflect the large drop in average hours worked reported at the same time. The MPC also concluded that this source of weaker pay does not affect the outlook for unit wage cost growth and, hence, the inflation outlook. The committee said it would revisit in February the issue of why average hours have dropped. |
| The interpretation of the decline matters for how much slack the MPC perceives there to be. As before, MPC rhetoric in the coming months will be sensitive to developments in inflation and the labour market. Commodity prices may have fallen this week, but core inflation moved up in the last release. Some surveys for 4Q also suggest that employment growth is set to strengthen. Depending on how average hours move, this may indicate that productivity growth has slowed in 4Q following the strong gains reported in 2Q/3Q.” | The interpretation of the decline matters for how much slack the MPC perceives there to be. As before, MPC rhetoric in the coming months will be sensitive to developments in inflation and the labour market. Commodity prices may have fallen this week, but core inflation moved up in the last release. Some surveys for 4Q also suggest that employment growth is set to strengthen. Depending on how average hours move, this may indicate that productivity growth has slowed in 4Q following the strong gains reported in 2Q/3Q.” |
| 1.14pm GMT | 1.14pm GMT |
| 13:14 | 13:14 |
| You can read our full story on the Bank of England here, by my colleague Katie Allen. | You can read our full story on the Bank of England here, by my colleague Katie Allen. |
| 1.09pm GMT | 1.09pm GMT |
| 13:09 | 13:09 |
| Martin Beck, senior economic advisor to the Ernst & Young ITEM Club, has interpreted the MPC minutes in a different way, focusing on pay. | Martin Beck, senior economic advisor to the Ernst & Young ITEM Club, has interpreted the MPC minutes in a different way, focusing on pay. |
| Despite falling unemployment, pay growth appears to have recently levelled off at a rate below what the committee was expecting in November. MPC members speculated on possible explanations, including a shift in the composition of employees towards lower-skilled and lower-paid workers or very low inflation feeding into modest pay rises. Beck says: | Despite falling unemployment, pay growth appears to have recently levelled off at a rate below what the committee was expecting in November. MPC members speculated on possible explanations, including a shift in the composition of employees towards lower-skilled and lower-paid workers or very low inflation feeding into modest pay rises. Beck says: |
| Our view is that the unemployment/inflation trade-off has continued to shift in a favourable direction, reflecting past strong growth in the supply of workers and the effect of labour market policies. | Our view is that the unemployment/inflation trade-off has continued to shift in a favourable direction, reflecting past strong growth in the supply of workers and the effect of labour market policies. |
| With the likelihood that these factors will continue to keep pay growth down, we remain confident that the MPC will not hike interest rates until the end of next year.” | With the likelihood that these factors will continue to keep pay growth down, we remain confident that the MPC will not hike interest rates until the end of next year.” |
| Updated | Updated |
| at 1.59pm GMT | at 1.59pm GMT |
| 1.04pm GMT | 1.04pm GMT |
| 13:04 | 13:04 |
| Analyst: Q2 rate hike still in play, despite some dovish comments | Analyst: Q2 rate hike still in play, despite some dovish comments |
| More on the Bank of England, which did nothing today, as expected. The only dissenter on the nine-strong monetary policy committee was Ian McCafferty, who voted for a quarter-point rate hike. | More on the Bank of England, which did nothing today, as expected. The only dissenter on the nine-strong monetary policy committee was Ian McCafferty, who voted for a quarter-point rate hike. |
| Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says: | Samuel Tombs, chief UK economist at Pantheon Macroeconomics, says: |
| The markets have interpreted the minutes as markedly dovish, and the committee’s statement that there is “no mechanical link” between its and other central banks’ monetary policy seems to be an attempt to stamp on the view that Fed rate hikes will force the MPC’s hand. The committee also refrained from passing further judgement on the low level of market interest rate expectations, even though last month’s strong inflation report forecasts seemed to be an attempt to steer markets towards expecting an earlier hike.” | The markets have interpreted the minutes as markedly dovish, and the committee’s statement that there is “no mechanical link” between its and other central banks’ monetary policy seems to be an attempt to stamp on the view that Fed rate hikes will force the MPC’s hand. The committee also refrained from passing further judgement on the low level of market interest rate expectations, even though last month’s strong inflation report forecasts seemed to be an attempt to steer markets towards expecting an earlier hike.” |
| Nonetheless, Tombs noted that the committee argued that, while pay growth had “flattened off”, this could just reflect short-term volatility or a change in the employment mix, rather than a sign of weaker underlying price pressures. It also cited evidence that households’ capacity to cope with higher interest rates had improved. | Nonetheless, Tombs noted that the committee argued that, while pay growth had “flattened off”, this could just reflect short-term volatility or a change in the employment mix, rather than a sign of weaker underlying price pressures. It also cited evidence that households’ capacity to cope with higher interest rates had improved. |
| We still think that the MPC is likely to hike in Q2, about six months earlier than markets expect now. Oil prices haven’t fallen enough to prevent CPI inflation picking up, perhaps to about 1% by March, and they will have little bearing on inflation in two years’ time, which is the relevant horizon for monetary policy. The fiscal squeeze and high debt levels will require the MPC to be cautious, but the continued tightening of the labour market and the likely downward pressure on sterling when the U.S Fed starts to hike suggest that the MPC will decide by May that interest rates need to rise. We see Bank Rate at 1% by the end of 2016 and 2% by the end of 2017. | We still think that the MPC is likely to hike in Q2, about six months earlier than markets expect now. Oil prices haven’t fallen enough to prevent CPI inflation picking up, perhaps to about 1% by March, and they will have little bearing on inflation in two years’ time, which is the relevant horizon for monetary policy. The fiscal squeeze and high debt levels will require the MPC to be cautious, but the continued tightening of the labour market and the likely downward pressure on sterling when the U.S Fed starts to hike suggest that the MPC will decide by May that interest rates need to rise. We see Bank Rate at 1% by the end of 2016 and 2% by the end of 2017. |
| The chart shows that the MPC was not unanimous at the start of two of the last three tightening cycles, suggesting that a dovish minority is unlikely to delay lift-off. | The chart shows that the MPC was not unanimous at the start of two of the last three tightening cycles, suggesting that a dovish minority is unlikely to delay lift-off. |
| 12.44pm GMT | 12.44pm GMT |
| 12:44 | 12:44 |
| Snap summary: VW lifts lid on the scandal | Snap summary: VW lifts lid on the scandal |
| What did we learn in that two-hour press conference in Wolfsburg? | What did we learn in that two-hour press conference in Wolfsburg? |
| 1) The emissions scandal wasn’t just a few bad apples. VW admitted that a culture that tolerated rule-breaking was a key factor in allowing some workers to install ‘cheat software’ on millions of cars. Flawed process were also to blame. | 1) The emissions scandal wasn’t just a few bad apples. VW admitted that a culture that tolerated rule-breaking was a key factor in allowing some workers to install ‘cheat software’ on millions of cars. Flawed process were also to blame. |
| 2) A major probe is underway. Investors are crawling over VW’s internal systems, checking millions of emails and putting thousands of staff in the spotlight. | 2) A major probe is underway. Investors are crawling over VW’s internal systems, checking millions of emails and putting thousands of staff in the spotlight. |
| 3) The board isn’t carrying the can. Chairman Hans Dieter Pötsch says there is no sign that top managers and board directors knew what was afoot. | 3) The board isn’t carrying the can. Chairman Hans Dieter Pötsch says there is no sign that top managers and board directors knew what was afoot. |
| 4) The EU recall will start next month. VW has found solutions to bring cars sold in Europe into line - some just need a software reboot, others need a device fixed. It will last for most of 2016. | 4) The EU recall will start next month. VW has found solutions to bring cars sold in Europe into line - some just need a software reboot, others need a device fixed. It will last for most of 2016. |
| 5) European Customers should get compensation, but we don’t know what. CEO Matthias Müller said that an appropriate package would be provided, to reflect the fact that VW | 5) European Customers should get compensation, but we don’t know what. CEO Matthias Müller said that an appropriate package would be provided, to reflect the fact that VW |
| 6) VW is struggling to get a fix for US cars. Muller hinted at frustration in dealing with American regulators, saying he wants to agree a solution fast. But given what VW has been up to, it can’t call the tune. | 6) VW is struggling to get a fix for US cars. Muller hinted at frustration in dealing with American regulators, saying he wants to agree a solution fast. But given what VW has been up to, it can’t call the tune. |
| 7) Sales are suffering. Müller tried to sound optimistic, saying that there hasn’t been a massive slump in VW’s financial performance. But he admitted that managers are trying to ‘stabilise’ the sales situation. | 7) Sales are suffering. Müller tried to sound optimistic, saying that there hasn’t been a massive slump in VW’s financial performance. But he admitted that managers are trying to ‘stabilise’ the sales situation. |
| 8) VW faces a taste of austerity. You know a company is getting serious about costs when it puts its private jet on the market. VW executives who enjoy pontificating on swanky-sounding committees should be worried - Müller wants them to get their hands dirty helping design new cars. | 8) VW faces a taste of austerity. You know a company is getting serious about costs when it puts its private jet on the market. VW executives who enjoy pontificating on swanky-sounding committees should be worried - Müller wants them to get their hands dirty helping design new cars. |
| 12.18pm GMT | 12.18pm GMT |
| 12:18 | 12:18 |
| And that’s the end of the press conference. If you missed it, don’t fret, as VW are promising to have a recording online shortly (here) | And that’s the end of the press conference. If you missed it, don’t fret, as VW are promising to have a recording online shortly (here) |
| 12.06pm GMT | 12.06pm GMT |
| 12:06 | 12:06 |
| Here are the minutes from the Bank of England’s meeting, explaining why interest rates aren’t going up yet. | Here are the minutes from the Bank of England’s meeting, explaining why interest rates aren’t going up yet. |
| Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £375 billion | Bank of England maintains Bank Rate at 0.5% and the size of the Asset Purchase Programme at £375 billion |
| 12.05pm GMT | 12.05pm GMT |
| 12:05 | 12:05 |
| Back to Volkswagen, and Müller appears to confirms that he *will* attend the Detroit Motor show (it runs from January 11 to 24). | Back to Volkswagen, and Müller appears to confirms that he *will* attend the Detroit Motor show (it runs from January 11 to 24). |
| 12.02pm GMT | 12.02pm GMT |
| 12:02 | 12:02 |
| Back to Britain briefly, and the Bank of England has left interest rates unchanged at today’s meeting. | Back to Britain briefly, and the Bank of England has left interest rates unchanged at today’s meeting. |
| Once again, only one policymaker (Ian McCafferty) voted to hike borrowing costs to 0.75%. | Once again, only one policymaker (Ian McCafferty) voted to hike borrowing costs to 0.75%. |
| Bank of England leaves bank rate at 0.5% in 8-1 vote following December MPC meeting | Bank of England leaves bank rate at 0.5% in 8-1 vote following December MPC meeting |
| 11.59am GMT | 11.59am GMT |
| 11:59 | 11:59 |
| Another questioner wants proper details from VW: | Another questioner wants proper details from VW: |
| Q: Which part of Volkswagen actually knew about the emissions cheating? And you must have known that meeting the US emissions targets would have been difficult {and thus might lead to rule-breaking] | Q: Which part of Volkswagen actually knew about the emissions cheating? And you must have known that meeting the US emissions targets would have been difficult {and thus might lead to rule-breaking] |
| You’ll have to wait until we report our full findings, Pötsch says. That’s when we’ll say who knew what, when. | You’ll have to wait until we report our full findings, Pötsch says. That’s when we’ll say who knew what, when. |
| 11.56am GMT | 11.56am GMT |
| 11:56 | 11:56 |
| Q: This scandal dates back to 2005, so what is VW doing about the staff and board members who were involved then? | Q: This scandal dates back to 2005, so what is VW doing about the staff and board members who were involved then? |
| Chairman Hans Dieter Pötsch says.... | Chairman Hans Dieter Pötsch says.... |
| We are investigating... trying to find out who knew what, when. Ask us again in a few months when investigators have reported. | We are investigating... trying to find out who knew what, when. Ask us again in a few months when investigators have reported. |
| Updated | Updated |
| at 11.56am GMT | at 11.56am GMT |