Rolling coverage of the latest economic and financial newsNewsflash: Russia's central bank has surprised economists by leaving interest rates on hold.At their final monetary policy meeting of the year, the Bank of Russia Board of Directors decided to keep the key rate at 21.00% per annum.The Bank of Russia will assess the need for a key rate increase at its upcoming meeting taking into account further lending and inflation dynamics.According to the Bank of Russia's forecast, given the monetary policy stance, annual inflation will decline to 4.0% in 2026 and stay at the target further on.I told the European Union that they must make up their tremendous deficit with the United States by the large scale purchase of our oil and gas.Otherwise, it is TARIFFS all the way!!!." Continue reading...
Dramatic economic slowdown means chancellor could face lower receipts and higher borrowing costs in 2025A dramatic slowdown in economic growth and rising borrowing costs since the budget could undermine the government's finances and force the chancellor, Rachel Reeves, to U-turn on pledges not to further increase taxes, analysts have said.With inflation on the rise again, the London stock market at its lowest point for more than a month and the Bank of England forecasting economic stagnation in the final three months of 2024, the government heads into the Christmas break weighed down by a gloomy outlook for the new year. Continue reading...
by Jillian Ambrose and Kalyeena Makortoff on (#6T2D3)
President-elect reignites fears of a trade war as he says bloc must make up its tremendous deficit' with USThe US president-elect, Donald Trump, has warned the EU that it will face trade tariffs on its exports to the US unless its member states buy more American oil and gas.Trump reignited fears of a looming trade war between the US and the EU in his first public statement regarding trade since he was elected president in November. Continue reading...
Even before he assumes the presidency, Trump has sent the Canadian government into paroxysms with trade threatsOne person, at least, was clearly delighted by the political upheaval triggered in Canada by this week's sudden resignation of the country's deputy prime minister.Chrystia Freeland, who stood down on Monday, had clashed with Justin Trudeau over the appropriate response to stiff tariffs threatened by Donald Trump - and the US president-elect was relishing the drama. Continue reading...
Sarah Davidson says the government has a shot at solving profound generational challenges and Bryan Merton welcomes Polly Toynbee's positive perspective. But Bernie Evans wants to see more action right now, and Philip Oliver urges Labour to keep voters engagedPolly Toynbee is correct that there are few quick fixes for the biggest problems facing the country (Labour seems to be flailing, but keep faith: Starmer's long-term plans are both radical and sound, 17 December). But we shouldn't delude ourselves that political leadership alone is enough to shift the dial on many of these generational challenges.While I have critiqued the detail of Whitehall reforms announced by Labour this winter, most of us who have worked in or with Whitehall would accept the need for these institutions to work differently. Central government must pay proper respect to the distinct contributions and roles of others - the devolved administrations; local government; public bodies; and the third and private sectors. Continue reading...
Japan's complex defence alliances built up over years as protection against China could be put at risk in a Trump-launched trade warArguably, no country in Asia has better reason to be in a state of anxiety over the return of Donald Trump to the White House than Japan, since the US has been the linchpin of Japanese foreign and security policy since the second world war.Back in 2017, well before he became prime minister, Shigeru Ishiba described Trump's method as one of placing his counterpart in a state of anxiety and tension, creating psychological instability and then initiating a deal". Continue reading...
Central bank lowers benchmark federal funds rate by a quarter of a percentage point to between 4.25% to 4.5%The US Federal Reserve cut interest rates on Wednesday, but suggested it would make fewer rate cuts than expected in 2025 amid questions over its fight to bring down inflation across the world's largest economy.Jerome Powell, the Fed chair, said inflation had been stubborn", but insisted the central bank believed its rate hikes would continue to erode the pace of price rises. Continue reading...
Starmer says more to do on economy so growth is felt in the pockets of working people'; US Federal Reserve widely expected to cut interest rates by a quarter pointHere's more detail from the inflation snapshot.Clothes retailers offered fewer discounts than last November, when they cut prices due to mild weather.Inflation rose again this month as prices of motor fuel and clothing increased this year but fell a year ago.This was partially offset by air fares, which traditionally dip at this time of year, but saw their largest drop in November since records began at the start of the century.We think there is a good chance airfares will rebound very strongly in December.Looking ahead, we expect headline inflation to reach 3.1% in April 2025 and stay at or above 3.0% until October 2025. We expect core goods price rises to tick up, reflecting somewhat stronger cost growth. Motor fuels inflation will boosted by base effects, and duty hikes will raise tobacco inflation. Inflation rising above the MPC's target is one reason why we expect rate-setters to cut interest rates gradually.The big declines in inflation are behind us. Next year inflation is likely to run closer to 3.0% than to its 2.0% target. Wage growth of over 5.0% and a surge in government spending could keep inflation higher for longer. Continue reading...
UK wage growth has risen to 5.2% per year, making Bank of England highly likely to leave interest rates on hold on ThursdayToday is a crunch day for struggling UK utility Thames Water.Thames is heading to the High Court this morning to seek appoval for a 3bn emergency loan designed to keep the company afloat. Continue reading...
Nobel laureate Joseph Stiglitz among 50 signatories of statement that points to risks to Labour's wider aimsFifty economists and policy experts have issued a warning to Rachel Reeves that encouraging the City to expand could threaten financial stability and jeopardise growth.The chancellor has called the UK's financial services sector the crown jewel in our economy" and has claimed that regulations imposed after the global financial crisis have gone too far". Continue reading...
Hugo Wong says the question today should be how much value the free movement of products and people has brought to our nationsReading made in China" on his toys for the first time, my young Chinese nephew asked me innocently whether Santa was Chinese. Oddly, like Santa's elves, toy assembly workers in China remain remote and faceless to most of us in the west. In Britain, most Asian migrants work backstage, too, kept in kitchens or workshops, taking the first and last train, earning low wages and hidden from our eyes. In many countries this Christmas, instead of being acknowledged for alleviating our cost of living crisis, those foreign workers will be vilifiedfor stealing our jobs and threatened with tariffs whose consequences economists are still not certain about.It is always easier to blame people who remain invisible and voiceless. Although our world has never been so interconnected, and hence our nations so reliant on each other's labour, Chinese society remains poorly understood. In the west, Chinese people remain enigmatic, the ever-silent and under-represented minority. When scrutinised, it is often with a political lens as well, maybe showing some cognitive bias. Continue reading...
The system relies on valuations from 1991, when Gorbachev was in power, but has become politically untouchableIt's a fairness thing. Just the idea that somebody sitting in a two-bedroom house in Hartlepool is paying more council tax than somebody who's living in a mansion - it's just offensive."The Labour backbencher Jonathan Brash, Hartlepool's MP, is on a mission to draw attention to an issue he jokingly calls the third rail of British politics" - because no mainstream party, including his own, wants to touch it for fear of electoral death. Continue reading...
Isabella Weber says economists must design policies that people feel make their lives better - or the US could slide toward fascismAs Donald Trump has pointed out, the price of groceries was one of the determining factors in his election win. But there was a moment when Kamala Harris led that debate.When Harris rolled out her economic platform in August, a new proposal captured the public's attention: a federal ban on price gouging for food and groceries. Though many voters seemed to support the idea, economists at the time derided it. If the federal government were to cap prices, they argued, supply and demand would become misaligned and shortages would ensue. Continue reading...
Britain's economy shrank by 0.1% in October, underlining the scale of Labour's challenge to get the economy growing. Figures from the Office for National Statistics showed the unexpected fall in GDP was driven by declines in construction and production, while the dominant services sector stagnated. Economists, polled by Reuters, had expected the economy to grow by 0.1%. It follows a decline of 0.1% in September and sluggish growth of 0.1% in the third quarter of the year, according to figures last month.The chancellor, Rachel Reeves, said the figures were 'disappointing' but insisted Labour was putting the economy back on track for growth. 'While the figures this month are disappointing, we have put in place policies to deliver long-term economic growth,' said Reeves. 'We are determined to deliver economic growth as higher growth means increased living standards for everyone, everywhere'
GDP figures underline scale of challenge for Labour to get the economy growingBritain's economy shrank by 0.1% in October, underlining the scale of Labour's challenge to get the economy growing.Figures from the Office for National Statistics showed the unexpected fall in GDP was driven by declines in construction and production, while the dominant services sector stagnated. Continue reading...
ECB lowers borrowing cost as inflation falls and economy remains weakThe European Central Bank cut interest rates for the fourth time this year and kept the door open to further easing in 2025 as growth takes a hit from political instability at home and the risk of a fresh trade war with the US.The ECB has been easing policy rapidly this year as inflation worries have largely evaporated and the debate has shifted to whether it is cutting rates fast enough to support a stagnant economy that is falling behind its global peers. Continue reading...
When an insecure government borrows credibility from business leaders, a lot can go wrongA new government, anxious over economic policy and fretful about its polling, invites business leaders to whip Whitehall into shape. That was Rachel Reeves, ordering ministers a few days ago to submit their spending plans to corporate executives. Among those wielding an iron fist against waste" will be former bankers from Lloyds and Barclays. But it was also DavidCameron in the summer of 2010, bringing in SirPhilip Green as his efficiency guru.From day one, Sir Philip's appointment raised eyebrows. Just weeks before the general election, the king of the high street" had endorsed the Tories to be the next government; now he too was part of it. Besides, what right did a billionaire have to audit public spending with so many questions over his own tax affairs? Certainly, the review produced by the businessman, taking all of two months and 33 pages, won't take much space in his biographies, nor will it rank among Lord Cameron's high points. The entire thing was a stunt, a cheap headline-grabber with a disastrous choice of frontman, given Sir Philip's role in the collapse of BHS, hollowing out its pension scheme, and the vote by MPs to strip him of his knighthood.Do you have an opinion on the issues raised in this article? If you would like to submit a response of up to 300 words by email to be considered for publication in our letters section, please click here. Continue reading...
Inflation rises to 2.7%, as expected, but markets still expect a quarter point Fed rate cut next weekBritain's rail network shuts down every year on Christmas Day, with a limited service on Boxing Day.Many routes will be closed for longer during the festive period because of Network Rail carrying out engineering work.Christmas is a good time to do major engineering work, because the demand is lower over several days.The lessons of that were very severe, and the rail industry and Network Rail, in particular, has worked extraordinarily hard not to replicate that again, because it was disastrous, and disastrous for passengers.That we are concerned about with several train operators, exacerbated by the fact that inevitably the closures close parts of the railway and put more pressure on others."I've been through this a lot with Alex [Alex Hynes, director general for the DfT's rail services group] recently and will continue to be into, right up to and over Christmas.Generally as a system, we're over-reliant on overtime working for train crew.
Federal reserve could cut rates for third time this year as prices rise 2.7% compared with a year beforeThe rate of US inflation barely moved in November, the last piece of major economic news before the Federal Reserve weighs whether to cut interest rates for the third time this year at its meeting next week.Prices rose 2.7% in November compared with a year before, according to consumer price index (CPI) data released by the Bureau of Labor Statistics (BLS) on Wednesday measuring the prices of select goods and services. Continue reading...
In today's newsletter: All governments do them. But what exactly are they and how can you tell if they worked or not?Good morning. There are certain phrases in news stories about government, aren't there, where your eyes glaze over like you've just wound down the window and asked someone for directions. Autumn statement; early day motion; fiscal rules; white paper; ping pong, weirdly. They're definitely all very important, but it would be cruel to stop the average punter halfway through a news story and ask them for a crisp definition.Today's case in point: the spending review. I mean, we all know what a spending review is, obviously - it's when they review the spending. But it's also one of the defining moments in the life of any government - and the one now being undertaken by the chancellor, Rachel Reeves, has been billed as the crucial first step in Labour's plan to hit the milestone" targets Keir Starmer set out last week, and on which he has said the government should be judged.UK news | Vodafone unjustly enriched" itself at the expense of scores of vulnerable small business owners by slashing commissions to franchisees running high street stores, according to allegations filed on Tuesday in the high court. Vodafone denied any misconduct ahead of a 120m legal claim.Syria | Syria's leading rebel group has named a new prime minister, Mohammad al-Bashir, to head the country's transitional government. Meanwhile, Israel said it had carried out more than 480 strikes over the previous 48 hours against weapons stockpiles to keep them out of the hands of extremists.Courts in crisis | The head of the government's sentencing review has said that specialist courts focused on breaking cycles of addiction could be rolled out across England and Wales. In an interview with the Guardian, David Gauke praised very encouraging" pilots of intensive supervision courts.Iran | Women in Iran could face the death sentence or up to 15 years in prison if they defy new compulsory morality laws due to come into effect this week. Amnesty International said the laws could lead to the execution of women who send videos of themselves unveiled to media outside Iran or engage in peaceful activism.US news | The suspect in the shooting death of the UnitedHealthcare CEO, Brian Thompson, will plead not guilty and fight extradition from Pennsylvania to New York, his lawyer said yesterday. Outside a court hearing, Luigi Mangione shouted: This is completely out of touch and an insult to the intelligence of the American people".While some of these efforts have made notable savings for the public purse and improved civil service capability ... they have often taken the form of discrete, temporary initiatives, and had less success embedding efficiency as a continuous process and culture across government. None, moreover, have led to a fundamental step-change in government's approach to public spending. Continue reading...
Kashim Shettima said Nigerians are proud of Badenoch's achievements, despite her denigrating the country where she was brought upRachel Reeves has rejected Lib Dem criticism (see 10.33am) that she is neglecting social care. She told broadcasters:For our NHS to work effectively we need a social care system that works.That's why, at the budget, I put 600m into investment in social care.High quality early education is the cornerstone of our promise to ensure tens of thousands of children are school ready every year, as part of the government's plan for change.The early years has been my priority from day one, because by giving more children the chance to start school ready to go, we transform their life chances, and the life chances of every child in their classroom.Since 2019 minimum wages have shot up by 66-70% but average funding rates have only risen by 32%. On top of this the national insurance contributions increase is going to cripple providers and the only way they can cover these costs is by increasing parental fees.We do welcome the increase in early years pupil premium to 570 which is something we have been campaigning for. It is good to see this uplift, but it is still not at the level of primary school pupil premium which is currently 1,455. The government's rhetoric about early years must match their investment which saves millions in a child's later years. Continue reading...
Teresa Ribera says changes are needed to make it easier for innovative firms to merge and spur the green transitionThe EU's new competition chief has signalled a shake-up of anti-trust rules to make it easier for innovative companies to merge, as well as a relaxation of state aid policy to spur the green transition.In her first major speech since taking office last week, Teresa Ribera said EU merger and anti-trust rules needed to take full account of innovation and future competition", signalling a move towards the reform agenda laid out by the former Italian prime minister Mario Draghi in a widely feted report. Continue reading...
by Sally Weale Education correspondent on (#6STGN)
Thinktank calls on government to set a long-term vision for radical changeCouncil deficits in England could spiral to absurd" levels in excess of 8bn in less than three years without radical reform of special educational needs funding, a leading economics thinktank has said.Spending on pupils with SEN has gone up nearly 60% over the past decade, with the government announcing a further 1bn in the October budget, but increased investment has failed to meet rising need, the Institute for Fiscal Studies (IFS) said. Continue reading...
by Heather Stewart, Kalyeena Makortoff and Richard Pa on (#6STFH)
Rachel Reeves to wield iron fist against waste' by examining departments' expenditure line by lineRachel Reeves has ordered Whitehall departments to submit their spending plans to challenge panels" of private sector experts, including bankers, as part of her forthcoming spending review.Formally kicking off the next phase of the spending review process, the chancellor said she was determined to wield an iron fist against waste", by examining departments' expenditure line by line. Continue reading...
Blow to Labour growth hopes as poll finds demand for staff falling at sharp and accelerated pace', particularly in permanent rolesThe number of job vacancies in November fell at the fastest rate since the start of the pandemic, as business confidence slumped to its lowest level in almost two years, according to two new reports.In a damaging blow to the government efforts to boost growth, the latest monthly report on the job market from accountancy firm KPMG and the Recruitment and Employment Confederation (REC) found demand for staff declined at a sharp and accelerated pace" last month, with the steepest fall in vacancies since August 2020. Continue reading...
First speech by UK chancellor to eurozone finance ministers since 2020 will promise business-like' approach to relationsRachel Reeves plans to end the UK's fractious" post-Brexit accord with the EU, a relationship she said had been defined by division and chaos", by promising closer ties in the first speech by a UK chancellor to eurozone finance ministers since 2020.Reeves will say she wants to adopt a business-like" approach through an economic reset" with the EU, offering the goal of driving up trade and growth. Continue reading...
Wooing of Mohammed bin Salman controversial because of human rights concernsKeir Starmer will meet Saudi Arabia's de facto leader, Crown Prince Mohammed bin Salman, as part of a controversial trip to the region this week designed to drum up investment for his pledge to overhaul British infrastructure.In his latest overseas trip, the prime minister will head to the Gulf this weekend. He will first travel to the United Arab Emirates for a meeting with its president, Sheikh Mohammed bin Zayed Al Nahyan, before travelling on to Saudi Arabia. Starmer will use the trip to push for a free trade deal with a group of six Gulf nations - Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates. Continue reading...
Latest report follows October's disappointing tally as Fed likely to cut interest rates for third time in 2024The US added 227,000 jobs in November, with 54,000 added jobs in healthcare, 53,000 leisure and hospitality jobs, and 33,000 government jobs added in the month.The unemployment rate increased to 4.2%, from 4.1% in October. Continue reading...
The president-elect's two main arguments for his tariff threat - to reduce migration and to combat drugs - are not credibleTo me, the most beautiful word in the dictionary is tariff, and it's my favorite word," said Donald Trump last month. Pundits, politicians and financial markets are trying to figure out why, since he announced a week ago that he would impose tariffs on the United States's three biggest trading partners: 25% for Mexico and Canada, and 10% for China.One theory is that tariffs can be a beautiful distraction. Trump, more than any previous US president, has fed on distractions for years, both to campaign and to govern. He can move seamlessly from one distraction to the next, like a magician preparing for the opportune moment to pull a coin from where it appears to have been hidden behind your ear. Continue reading...
S&P survey shows sector narrowly avoided contraction in November as firms worried about employment costsGrowth in the UK's dominant services sector slowed to its lowest rate in more than a year in November as firms digested business tax rises in the autumn budget.The closely watched S&P Global UK services PMI survey scored 50.8 in November, slowing from 52.0 in October. Continue reading...
Government's spending and borrowing plans mean rates will stay higher for longer, according to OECDUK interest rates will fall by less than expected over the next two years after Rachel Reeves revealed significant spending and borrowing plans in the budget, according to an influential report.In its annual economic survey, the Organisation for Economic Cooperation and Development (OECD) said UK inflation would also surpass previous forecasts next year, and upgraded growth projections for the economy, because of boost from October's budget. Continue reading...
by Originally published on January 5th 2024 on (#6SPAN)
Alarmed by the rising tide of waste we are all creating, my family and I decided to try to make do with much less. But while individual behaviour is important, real change will require action on a far bigger scale. By Chip ColwellBecause of industrial action taking place by members of the National Union of Journalists at the Guardian and Observer this week, we are re-running an episode from earlier in the year. For more information please head to theguardian.com. We'll be back with new episodes soon. Continue reading...
Deputy governor of the Bank of England who helped to rescue the Midland Bank from collapse in the late 1980sAt an age when many people are preparing for retirement, Sir Kit McMahon, who has died aged 97, made his first move into business. In 1986 McMahon, an economist and central banker, was parachuted into Midland Bank to rescue the once-mighty institution - a process that eventually led to its takeover by the Hongkong and Shanghai Bank (HSBC).The period was, he said, the most exciting and enjoyable of my life". But it was a difficult time and, while nobody doubted McMahon's intellectual powers, his belated transformation into a bank chief executive was only a partial success. Continue reading...
by Pamela Duncan, Will Craft, Oliver Milman, Lucy Swa on (#6SNQW)
Conflicts around the globe and domestic policies on immigration and vaccinations are likely to face upheavalThe second Donald Trump administration is expected to have a vast impact both domestically and around the world, potentially reshaping everything from the very private - such as abortion access in the US - right through to something as public as the health of the planet itself.While Trump's policies and their effects will take time to emerge, we can tell a lot about where things are heading by comparing the status quo to current data trends in six key areas, from migration and war through to climate and vaccine uptake. Continue reading...