Faced with the the biggest inflation rise in 40 years, the Bank must do more than berate workersIn the 25 years since the Bank of England was made independent, politicians have happily played along with the idea that they have no place in monetary management. Yet with inflation now reaching 9% – levels last seen 40 years ago – that pretence has broken.Instead, senior Conservative MPs scolded the Bank for letting prices soar, suggesting Covid stimulus measures had been allowed to go on too long. For his part, the governor of the Bank of England, Andrew Bailey, also abandoned neutrality with his repeated calls for workers to exercise “restraint” and sacrifice higher wage demands.Sahil Jai Dutta is a lecturer in political economy and co-author of Unprecedented: How Covid-19 Revealed the Politics of Our Economy Continue reading...

Headline CPI rate fuelled by increase in household bills and rising transport costs

Rolling coverage of the latest economic and financial news

Archie Norman backs UK plans to scrap parts of protocol, saying lorries require ‘700 pages of documents’

Most workers face fifth month of falling living standards despite soaring City bonusesSoaring bonuses for City bankers and high signing-on fees for construction and IT professionals pushed Britons’ average annual pay up by 7% in March, but most workers suffered a fifth consecutive month of falling living standards.Without bonus payments, workers were paid an average 4.2% wage increase in the three months to the end of March, well below the 7% inflation rate recorded in the same month, according to the Office for National Statistics. Continue reading...

Bank of England’s Andrew Bailey blames UK’s highest inflation rate for three decades on Russia-Ukraine war and Covid

Rolling coverage of the latest economic and financial news

European Commission downgrades growth prospects from 4% to 2.7%, while economy slows rapidly in China

Developed nations need to thwart the economic fallout from the Ukraine war from destroying the lives of the world’s most vulnerableBig shocks to the global economy, such as Russia’s invasion of Ukraine, understandably capture the most attention. But a new worldwide pattern of “little fires everywhere” may be equally consequential for longer-term economic wellbeing. Over time, these small fires can coalesce into one that is just as threatening as the initial large fire that acted as the catalyst.In addition to causing widespread death and destruction, and displacing millions of people, the Ukraine war continues to stoke strong stagflationary winds throughout the global economy. The resulting damage – whether in the form of higher food and energy prices or new supply-chain disruptions – cannot be easily or rapidly countered by domestic policy adjustments. Continue reading...

Leading economists publish letter to Rishi Sunak in response to proposed financial services and markets billA group of 58 leading economists and politicians, including the former business minister Vince Cable, has written to the chancellor to say that scaling back City regulation will put the UK at risk of another financial crash.The open letter, which has also been signed by the former Greek finance minister Yanis Varoufakis and Columbia University professor Adam Tooze, was sent in reaction to the Queen’s speech, which outlined Rishi Sunak’s plans to “cut red tape” through a financial services and markets bill. Continue reading...

Andrew Bailey’s appearance at select committee will come amid work from chancellor to find new ways to ease cost of livingThe Bank of England governor, Andrew Bailey, will face a grilling from angry Conservative MPs over inflation on Monday, as cabinet sources moved to quell the incendiary remarks about the Bank’s independence.The governor’s appearance before MPs – which has been likened to the showdowns with former Bank boss Lord Mervyn King during the 2008 crash – will come amid intense work from the chancellor, Rishi Sunak, to find new measures to ease the cost of living before the summer recess. Continue reading...

Covid has amplified the threats that accompany the country’s role as an economic superpowerChina has been central to the story of globalisation over the past 30 years, but now it is struggling. More than two years after Covid-19 cases were discovered in Wuhan, the world’s most populous country has yet to get on top of the virus. Draconian lockdowns have been imposed because China’s vaccines are less effective than those available in the west, and immunity levels are lower as well.Growth is slowing, and not just because of the tough restrictions insisted upon by President Xi Jinping. Flaws in China’s economic model coupled with a more hostile geopolitical climate mean the days of explosive expansion are over. Continue reading...

After an initial shock to businesses, manufacturing jobs are growing four times faster here than the UK averageWhenever Boris Johnson’s government wades into battle over the Northern Ireland protocol, it wields one assertion like a broadsword: that the protocol is ruining the region’s economy. Checks on goods entering Northern Ireland are disrupting trade, increasing prices and bankrupting businesses, and the damage will worsen unless the protocol is changed, goes the argument.The Institute of Economic Affairs (IEA), a rightwing thinktank, joined the fray last week with a report that estimated the annual cost of the agreement at £850m. Continue reading...

As Simon Kuper points out in his excellent book, both groups betrayed us to Moscow – but the former did it deliberatelyThe chaos caused by Brexit is here for all but the most pigheaded Brexiters to see. Why, no less a figure than the minister for Brexit “opportunities”, one Jacob Rees-Mogg, finds himself having to delay further implementation of customs bureaucracy because of the damage even he can see in front of him. Bringing in full checks the government had agreed in order “to get Brexit done” would, said Rees-Mogg, have been “an act of self-harm”, adding an extra £1bn to the already enormous cost of Brexit. No, I am not making this up.There was another priceless example of what a nonsensical government we have when Conor Burns, the minister of state for Northern Ireland, appeared on Channel 4 News last Wednesday. Continue reading...

Inflation is set to jump to 9% this week when official figures are released, and fears of a slump are growingBritain’s hard-pressed households could feel even worse done by this week when official inflation figures show just how fast the cost of living is rising. Economists are forecasting a jump from March’s 7% to 9.1% in April.If the pundits are right, the consumer prices index will be at its highest level since 1990, when the UK was struggling with one of its worst postwar property slumps and a full-blown recession. Continue reading...

ONS survey reveals worsening effects of cost of living crisis, with food prices forecast to have risen by 9% in AprilHouseholds have been warned that the UK’s “golden era” of cheap food is over, as official figures published on Friday pointed to the toll of the cost of living crisis, with two in five people buying less food to get by.The former Sainsbury’s boss Justin King said shoppers now faced hard choices over how to spend their money as the financial shock, caused by the war in Ukraine, pushes up prices on supermarket shelves. Continue reading...

Rolling coverage of the latest economic and financial news

With inflation set to reach 10% and wages falling short, ministers can’t ignore the crisis affecting ever more voters

Calls for emergency budget grow as UK economy contracts unexpectedly in March, with consumers cutting back on spending, and car sector struggling

Across-the-board tax cut would be blunt, very costly and give wealthy a boost, warns Howard DaviesThe chairman of NatWest bank has argued that changes to the benefits system would be the most effective way for the government to help the poorest families struggling to cope with the cost of living crisis, instead of cutting taxes that also give the wealthy a financial boost.Sir Howard Davies, a former deputy governor of the Bank of England, said soaring energy bills and rampant inflation were disproportionately affecting the poorest fifth of households and they should be the focus of financial support measures. Continue reading...

Analysis: Rising prices, a tight labour market and a falling pound – the economy ticks every warning boxThere is a word for what is about to hit the UK economy and it is stagflation.The combination of two dreaded terms in the economic lexicon – stagnation and inflation – should send ripples of apprehension and unease through the corridors of the Treasury’s Horse Guards Road offices and the Bank of England’s home on Threadneedle Street. Continue reading...

Dame Sharon White follows Tesco head in urging UK government to help with rising energy and grocery billsThe boss of John Lewis has urged the government to intervene with a financial package of support to protect families from the cost of living crisis on the same scale as it did to help the UK deal with the Covid pandemic.Dame Sharon White, a former second permanent secretary at the Treasury, said the government needed to act urgently because families were struggling to pay utility and food costs as energy bills and inflation soared. Continue reading...

Sharp selloff of shares and fall in pound against the dollar follow news of surprise contraction in economyPressure is mounting on the government to deliver an emergency summer mini-budget after recession fears were heightened by a surprise contraction in the economy in March.Evidence that the cost of living crisis was biting even before the arrival last month of dearer energy bills and higher taxes led to a sharp selloff in shares and a drop in the pound’s value to a two-year low against the US dollar. Continue reading...

The west should help rebuild after the Russian invasion – and it can learn lessons from the 1940s

Consumer price index reveals costs rising by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021Price rises slowed in the US in April but the annual inflation rate remained close to a 40-year high, leaving many Americans struggling to afford necessities including food, shelter and fuel.The latest consumer price index (CPI) figures – which measure a broad range of goods and services – showed prices rising by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021. Continue reading...

The PM calls the opposition leader a ‘loose unit’ for supporting a rise in the minimum wage. Anthony Albanese responds that Scott Morrison is ‘loose with the truth’. Paul Karp talks to Jane Lee about what this all means for wages and the campaign Continue reading...

Thinktank calls for urgent £25-a-week UC uplift and £250 one-off payment to cushion poorest from inflationMore than 250,000 households will “slide into destitution” next year, taking the total number in extreme poverty to around 1.2m, unless the government acts to help the poorest families hit by the energy price shock, according to the National Institute for Economic & Social Research (NIESR).More than 1.5m households will see the rise in food and energy bills outstrip their disposable income, forcing them to rely on savings or extra borrowing to make up the shortfall, said the thinktank, which blamed welfare spending cuts since the Brexit vote in 2016 for leaving millions of families in a vulnerable financial position. Continue reading...

Forecast outstrips previous estimate as booming profits for energy firms would net more cash for struggling UK households

Analysis: Experts warn that sharp losses for sterling could drive up cost of imports and invite attacks on the currencyThe judgment of the markets was swift and brutal. Currency traders took one look at what the Bank of England was predicting for the UK economy and launched a sustained attack on the pound.It was noon last Thursday when Threadneedle Street announced it was expecting that a 40-year high of more than 10% for the annual inflation rate would coincide with a shrinking economy. Continue reading...

Rolling coverage of the latest economic and financial news

BRC says homewares and electrical goods hard hit, while Barclaycard reports rise in travel spendingThe UK’s soaring cost of living and last month’s record increase in household energy bills have slammed the brakes on consumer spending, retail sector figures show.However, according to separate data, April was the strongest month for international travel spending since before the pandemic, as Britons took advantage of the easing of Covid restrictions to book foreign holidays. Continue reading...

The south Asian country is the first to buckle under economic pressures compounded by Russia’s war on Ukraine, but it won’t be the lastThe departure of Sri Lanka’s prime minister, Mahinda Rajapaksa, follows weeks of protest and a deepening crisis. There is no bankruptcy system for states but if there was then the south Asian country – down to its last $50m (£40m) of reserves – would be first in line to use it.A team from the International Monetary Fund (IMF) this week started work with officials in Colombo over a bailout that will include a tough package of reforms as well as financial support. But as the IMF and its sister organisation, the World Bank, know full well, this is about more than the mismanagement of an individual country. They fear Sri Lanka is the canary in the coalmine. Continue reading...

Expert sounds warning as Bank of England economist says inflation ‘uncomfortably high’ amid cost of living crisisThe squeeze on British households from high inflation could be bigger and last longer than expected, amid a series of economic shocks from Brexit, Covid and Russia’s war in Ukraine, economists have warned.Michael Saunders, a member of the Bank of England’s rate-setting monetary policy committee (MPC), said inflation was “uncomfortably high” as households come under pressure from soaring energy, food and fuel bills. Continue reading...

FTSE 100 and S&P 500 among those to slide as investors worry that worldwide growth is weakeningGlobal markets fell sharply on Monday as fears over rising inflation and a slowdown in China’s export growth fuelled worries about the health of the world economy.Stocks in Asia-Pacific markets, Europe and the US all dropped into the red as investors fretted that global growth is weakening, at a time when central banks are raising interest rates to rein in surging inflation. Continue reading...

Worries over global growth hit stocks and metals prices, and the pound falls again

Pressure for summer mini-budget will increase as economic effects of Russia-Ukraine war take holdLess than three months after Russian troops moved across the border into Ukraine the economic implications of the war are gradually sinking in. There have been other conflicts since 1945 but it is hard to think of one that has had such a dramatic and sudden impact. The only real comparison is with the Yom Kippur war of 1973.Support for Ukraine has been widespread in the west, among governments and the public, but only now are the consequences of sanctions and embargos starting to be felt. This week, the US Federal Reserve and the Bank of England raised interest rates in the face of annual inflation rates heading towards 10%. The European Central Bank will follow suit in the months to come. Continue reading...

The idea that central banks have rediscovered their mojo is not borne out by the diverging policies on rates they are makingThere is a school of thought that says central banks, after a decade of running scared, have found their mojo again.Their anxiety stemmed from the 2008 crash, when banks panicked in the wake of the US sub-prime property crash and drained the financial system of funds. Only the central banks could make up the difference – with a lending programme known as quantitative easing – and it has been the same story ever since. Continue reading...

Analysis: The chancellor has been warned that the UK is heading for a recession, but he is reluctant to actThe pressure is mounting for Rishi Sunak – the question is when will he crack? After the Bank of England warned the economy was heading for a recession caused by the cost of living crisis, with inflation set to top 10% by the autumn, demands on the chancellor for a fresh package of emergency support for struggling families have reached a crescendo.Threadneedle Street forecasts the second-biggest income squeeze since modern records began in 1964, with inflation racing to the highest level since the 1980s. Continue reading...

The chain said discussions with lenders collapsed on Friday as creditors refused to extend a deadline for the retailer to find more cash

Employers added 428,000 jobs with unemployment rate at 3.6%, close to its pre-pandemic lowUS employers continued hiring at a strong pace in April, adding 428,000 jobs as the unemployment rate held steady at 3.6%, close to its pre-pandemic low.Hiring continued despite worries about the Federal Reserve’s plans to hike interest rates at their fastest pace in decades in an attempt to curb soaring inflation. April represented the 12th consecutive month of jobs gains above 400,000. Continue reading...

The pound slides following gloomy forecasts and confusion within the Bank of EnglandAt least the Bank of England has stopped dancing around the idea that inflation will hit double digits this year. Back in March, the prospect wasn’t spelled out starkly; instead, there was a warning that the peak would be “several percentage points” higher than the 7.25% previously forecast. Now there’s no fudging: 10.2% is the official forecast for the fourth quarter of this year.And, frankly, the figure should surprise nobody who has been tracking wholesale energy prices and projections for household bills, where the open question is how close the price cap (currently £1,971, having been £1,277 at the start of this year) gets to £3,000 when it is next revised in October. The Bank used £2,800 in calculations, which was entirely reasonable since half the six-month measurement period for calculating the cap has already passed. Continue reading...

There are three things agricultural businesses need to watch carefully in 2022: Australian interest rates, the US economy, and China’s lockdowns

Analysis: As the Bank of England raises interest rates the message is clear – the 1970s are back

Sterling tumbles to lowest since June 2020 as Bank of England lifts interest rates to 13-year high, cuts growth forecasts, and sees inflation hitting 10%

The interest rate going up to 1% has implications for borrowers and savers. Here’s how it could affect youThe Bank of England has increased the base rate to 1% in an attempt to curb inflation. It’s the fourth increase since the start of December, when the base rate was at 0.1%. Here, in numbers, is what it could mean for your finances: Continue reading...

Rise to 1% is fourth successive increase and highest level since February 2009The government is facing calls to launch a fresh package of emergency financial support for households after the Bank of England warned Britain’s economy could plunge into recession before the end of the year.As the nation went to the polls in the local elections, the Bank raised interest rates from 0.75% to 1% to tackle spiralling inflation made worse by Russia’s war in Ukraine. With a fresh jump in home energy bills expected in October, it forecast inflation would rise above 10% this year, the highest level since 1982. Continue reading...

Economists predict minimum 0.25 point rise as households contend with cost of living crisisThe Bank of England is likely to raise interest rates to the highest level since the recession caused by the 2008 financial crisis, despite mounting concern that the economy is weakening amid the cost of living crisis.City economists widely expect the Bank will increase its base rate by at least 0.25 percentage points to 1% on Thursday, lifting borrowing costs to the match the level set in February 2009 when it was in the process of cutting rates to historic lows as the global financial system imploded. Continue reading...

At the moment, you might ask how Keir Starmer’s party could possibly fail. Yet things may not be quite so simpleThis week’s local government elections take place against the backdrop of a deepening cost of living crisis. Inflation is at its highest level in three decades, and the worst is yet to come. With wages struggling to keep pace with rising prices, living standards are being eroded fast.Throw in Partygate and the fact that it is mid-term for the current parliament, and all the conditions are in place for voters to give the government a proper kicking. The Conservatives expect to perform terribly, with good reason.Larry Elliott is the Guardian’s economics editor Continue reading...

London’s Elizabeth line finally launching, while German exports to Russia fell nearly two-thirds in March and climate activists have disrupted two bank AGMs

Analysis: New Labour’s chancellor revealed his plan to a surprised Eddie George and his private secretary, now governor, Andrew BaileyGordon Brown had a surprise in store for Eddie George when he summoned the then governor of the Bank of England to a meeting at 11 Downing Street on bank holiday Monday, 25 years ago this week.For the past two years, Labour’s new chancellor had been working on a plan to give Threadneedle Street the right to set interest rates and now he was ready to tell George about it. Secrecy was complete. The first the City heard of the idea that henceforth it would be the Bank’s job to hit the government’s inflation target, was when it was announced 24 hours later. Continue reading...