Risky asset prices in several markets are at historically high levels and could be primed for sharp fall, it adds

Low-tax policy of past 18 years had attracted multinationals such as Google and Facebook to Dublin

Huw Pill says inflationary pressures still likely to be temporary and will fall back after disruptions of Covid and BrexitThe Bank of England’s new chief economist has warned high rates of inflation could last longer than expected, due to severe supply shortages and rising household energy bills.Huw Pill, who replaced Andy Haldane at Threadneedle Street last month, said inflationary pressures were still likely to prove temporary and would fall back over time, as the economy adjusted after disruption caused by Covid and Brexit. Continue reading...

Next boss, thinktanks and unions criticise Boris Johnson, saying ‘shortages cannot be blustered away’Business leaders rounded on Boris Johnson for lacking a coherent economic plan after he delivered a boosterish conference speech that made barely a mention of the supply chain crisis.The address was condemned as “bombastic but vacuous and economically illiterate” by the free market Adam Smith Institute, while the Conservative thinktank Bright Blue issued a stark warning. Continue reading...

Business leaders have hit back at Boris Johnson over claims they allowed Britain to become a low-wage and low-skilled economyBritain’s businesses stand accused of allowing the UK to become a low-wage, low-skilled and low-productivity economy bedevilled by slow growth.The prime minister criticised company bosses for wanting to import cheap workers to fill vacancies rather than improve the skills of young people already in the UK. Only a more skilled workforce could command higher wages and better living standards, Boris Johnson said. Continue reading...

Rolling coverage of the latest economic and financial news

Cost per litre nears the record 142.48 set in April 2012, stoked by global demand outpacing supply rather than UK fuel shortagePetrol prices could reach all-time highs before Christmas, the RAC warned, signalling “misery” for motorists still reeling from the fuel shortage crisis.Amid signs that the number of petrol forecourts running dry was easing, the drivers’ organisation warned that anxiety about whether motorists could fill up their tanks was likely to be replaced by concern about how much it would cost. Continue reading...

BCC warning comes as Greggs flags price pressures amid surge in fuel and energy costsNearly two-thirds of UK manufacturers expect to raise their prices in the run-up to Christmas after being hit by mounting cost pressures, a leading employers’ group has said.The British Chambers of Commerce said inflation expectations had risen to their highest since its records began at the end of the 1980s, with 62% of industrial firms planning price hikes over the next three months. Continue reading...

Almost 140 countries understood to be in final OECD talks on measures to stop firms moving profits to tax havensAlmost 140 countries are edging closer to a global deal on the taxation of multinationals, with agreement on a minimum 15% rate of corporation tax set to be announced as part of a landmark statement at the OECD in Paris on Friday.Governments representing more than 90% of the world economy are understood to be in the final stages of talks on a global minimum rate and other measures designed to stop multinationals shifting profits into tax havens. Continue reading...

Fund chief Kristalina Georgieva says most serious obstacle to full recovery remains Covid vaccine divide between rich and poor statesThe head of the International Monetary Fund has warned the world economy remains “hobbled” by the Covid-19 pandemic as she revealed her organisation has revised down its forecast for global growth this year.Kristalina Georgieva, the IMF’s managing director, said the most serious obstacle to a full recovery was the vaccine divide between rich and poor nations and warned the global economy could suffer a cumulative $5.3tn loss over the next five years unless it was closed. Continue reading...

The chancellor’s praise for the economic policies of previous Conservative governments augurs badly for struggling familiesOne of the lessons that leading Brexiters learned from the 2016 referendum was that brazen opportunism can pay off handsomely. A Eurosceptic movement born in the more arcane reaches of the Conservative right, committed to deregulated, laissez-faire economics, achieved its goal by channelling a desire in Labour’s heartlands for more, not less, protection from the global economy.This week, as the Conservative party conference meets in Manchester, the same audacity is on display again. As the army moves in to deliver urgent fuel supplies, food and labour shortages grow and an unprecedented, wasteful cull of more than 100,000 pigs looms. Boris Johnson and his ministers have hailed the chaos as necessary disruption on the way to a “high skills, high wage” economy. The worse things get, the better they will become, it is claimed, as business is forced to adapt to a long-term absence of migrant labour and up its game on pay and conditions. The abject handling of a foreseeable crisis, exacerbated by Brexit, is thus rationalised post-hoc as the royal road to “levelling up”. Continue reading...

Brexit, global supply chain issues and the ‘long tail of Covid-19’ creates ‘perfect storm for UK firms’Staff shortages are rippling out from the haulage, farming and hospitality sectors to almost all parts of the economy, putting “severe pressure” on medium-sized business across the UK, a new survey has warned.More than a quarter of the 500 firms polled said the lack of staff was putting pressure on their ability to operate at normal levels, with reduced stock – due to the resulting supply chain disruption – hurting their business. Continue reading...

Renowned economist Joseph Stiglitz says chief is victim of conservative ‘hatchet job’ using unfair report to discredit herThe International Monetary Fund boss, Kristalina Georgieva, is the victim of a plot to oust her, according to a Nobel prize-winning economist, after a report alleged that she applied “undue pressure” on staff to boost China’s standing in global rankings while in her previous job at the World Bank.Joseph Stiglitz, a former chief economist at the World Bank, said a report prepared by the law firm WilmerHale on concerns about China’s influence at the Washington-based organisation was being used unfairly to “discredit and oust” Georgieva. Continue reading...

PM’s remarks come as Liz Truss insists it’s the role of business, not ministers, to resolve such problemsQueues for petrol and mass slaughter of pigs at farms because of a lack of abattoir workers are part of a necessary transition for Britain to emerge from a broken economic model based on low wages, Boris Johnson has argued.His comments, on the first day of the Conservative conference, came as Liz Truss, the foreign secretary, insisted it was the role of business, not ministers, to sort out such problems. Continue reading...

The long-running series in which readers answer other readers’ questions on subjects ranging from trivial flights of fancy to profound scientific and philosophical conceptsHow much poorer would the rich need to be to provide a basic minimum income for everyone? Robin DevanySend new questions to nq@theguardian.com. Continue reading...

Rising prices and lack of goods are what happens when just-in-time economy collides with seat-of-the-pants governmentIt all seems to have happened so fast. Only a few months ago, the government was congratulating itself for the speed at which Britain was emerging from the pandemic. But as the nights have lengthened, there have been empty shelves at supermarkets, spiralling energy prices and queues snaking back from petrol stations.If there is a general sense of bemusement at all this, then there really shouldn’t be. This is what happens when just-in-time production methods collide with just-in-time government and turn a problem into a crisis.Britain now has just 1% of Europe’s storage capacity, enough to cope with four or five cold winter days. Continue reading...

Pictures of destitute Brazilians searching scraps for food lay bare scale of economic and social crisisHeart-wrenching photographs of destitute Brazilians scavenging through a heap of animal carcasses for food have laid bare the hunger crisis blighting Latin America’s most populous nation, where millions have been plunged into deprivation by the coronavirus pandemic and soaring inflation.The images, taken in Rio last week by the prize-winning photojournalist Domingos Peixoto, show the group rummaging for scraps in the back of a lorry that had been transporting the discarded offal and bones to a factory that makes pet food and soap. Continue reading...

Amid the petrol crisis and labour shortages, hardline MPs continue to celebrate the damage Britain has inflicted on itselfIn 1979 the Conservative party under Margaret Thatcher fought a successful election campaign with the slogan “Labour isn’t working”. The campaign relied on a profusion of posters purporting to show a long line of unemployed people. It later turned out that this was not a real dole queue but a group of actors hired for the purpose.This was characteristic of the loose attitude to the facts – what President Obama memorably dubbed “truth decay” – that has become more prevalent in recent years. Continue reading...

The chancellor will address the Conservative party conference in Manchester against the background of a faltering economyRising prices, queues at the petrol pumps and a flatlining economy provide a sobering backdrop to Rishi Sunak’s speech at the Conservative party conference in Manchester on Monday .The outlook was more promising only three months ago when the UK was recovering quickly from the lockdown restrictions imposed at the start of the year. Continue reading...

Analysis: mismatches between high-vacancy sectors and those receiving emergency support belie Sunak’s trust in market forcesOver the past 18 months, Rishi Sunak has been in bridge-building mode. Providing billions of pounds in emergency financial support through the furlough scheme to carry businesses and workers over the chasm of the coronavirus pandemic.In an unprecedented act of state intervention worth £70bn, almost 12 million jobs were protected from the worst economic collapse in 300 years. More than 9bn hours of pay was topped up to 80% of a workers’ usual wage, up to £2,500 per month, across every industry from advertising to waste collection. Continue reading...

From Liverpool to LA, shortages of energy, labour and transport are threatening recovery from Covid

Greater financial instability, fraud and funding of terrorism likely unless governments toughen supervision, fund saysTougher regulation is needed to prevent the rapid growth in cryptocurrencies leading to financial instability, defrauding of consumers and the funding of terrorism, the International Monetary Fund has said.The Washington-based IMF said the 10-fold increase in the market value of crypto assets – digital or virtual currencies – to more than $2tn since early 2020 required more active and collaborative supervision by governments. Continue reading...

Ministers must sit down with businesses to work out a recovery plan to stop Britain’s economy falling into recession

Supply chain shortages and price rises could lead to the zero growth and high inflation seen in the 1970s

GDP grew faster than forecast in second quarter as fewer Covid restrictions prompted households and companies to spendHigher NHS spending, stronger investment and a bounce back in exports helped the UK economy to recover more quickly from the lockdown at the start of the year, official figures have shown.After shrinking by 1.4% in the first three months of the year, the economy grew by a record 5.5% in the second quarter as restrictions on activity were eased. Continue reading...

Output, orders and employment all fell in September, according to official data, as Beijing turns to Russia to ease its electricity shortages

Rishi Sunak criticised for cutting off wage-subsidy lifeline that still supports over a million jobsRishi Sunak’s decision to wind up the furlough scheme today will intensify Britain’s economic woes, an array of unions, business groups, employment experts, City firms and politicians have warned.With signs of activity slowing even before pressures on supply chains began to mount over the past few weeks, the chancellor was criticised for cutting off a wage-subsidy lifeline that is still supporting well over a million jobs. Continue reading...

Burger King and Starbucks leaders also sign up to new body to discuss mounting challengesBosses from chains including Nando’s, Starbucks and Prezzo have been drafted in to advise the government on its plans to boost the hospitality sector after the easing of lockdown this summer.Amid mounting concern over staff shortages and supplies across the economy, ministers said the group of executives would help to identify and oversee actions that the government could take to smooth the post-pandemic recovery for pubs, hotels, cafes and restaurants. Continue reading...

Latest rail franchise to hit the buffers at least arrived at the destination via an unconventional route

The long-running series in which readers answer other readers’ questions on subjects ranging from trivial flights of fancy to profound scientific and philosophical conceptsHow much poorer would the rich need to be to provide a basic minimum income for everyone? Robin DevanyPost your answers (and new questions) below or send them to nq@theguardian.com. A selection will be published on Sunday. Continue reading...

Andrew Bailey says inflationary pressures strengthen the case but ‘we are monitoring situation closely’The inflationary pressures building in the UK has made a rise in interest rates next year more likely, the central bank chief has warned.Against a backdrop of rising fuel prices and the prospect of higher transport costs pushing up the price of food in the run-up to Christmas, the Bank of England’s governor said there were signs that inflation could be sustained and the central bank’s monetary policy committee (MPC) may need to increase borrowing costs in 2022. Continue reading...

Average price of litre of petrol rises from 135.9p on Friday to 136.6p on Sunday, with further jump expected

With Britain facing multiple challenges, Keir Starmer’s party is right to promise prudenceLabour is not much cop at winning elections. In its entire history, the party has won only five elections with a comfortable majority. The brutal truth is that Labour should be good at opposition because it has plenty of practice at it.Just about every political pundit has advice for Sir Keir Starmer on how to avoid a fifth successive defeat, an outcome that would be dismal even by Labour’s own standards. To win, it is said, Labour needs to be seen as a solid government-in-waiting but also have radical policies to put before the public. It must challenge the Tories for the support of older voters while appealing to the young; and win back Brexit supporters in former “red wall” seats while at the same time hanging on to those who backed remain in 2016. There are, no question, easier jobs than being the leader of the opposition. Continue reading...

After the success of the chancellors’s £70bn programme, there is uncertainty about the future direction of the economyThe biggest state intervention in the UK’s labour market in peacetime comes to an end this week when the government finally winds up its furlough support.Barring an unlikely last-minute change of heart, a wage subsidy that has been in place for 18 months and has cost £70bn will no longer be open to struggling firms. Continue reading...

The growth of mechanisation brings many benefits, yet vigilance is needed to keep it in check

Rolling coverage of the latest economic and financial news

With inflation set to rise, alongside the cost of shopping and transport, the economic fallout will squeeze Britons’ budgetsThe Bank of England warned this week that surging energy bills will lead to inflation topping 4% this winter, piling pressure on already tight household budgets. The economic fallout from the pandemic and Brexit is pushing up the cost of essentials such as food and clothing as well as travel and even doing up your home. We look at how this perfect storm is affecting you. Continue reading...

There are signs that previously struggling social democratic parties are drawing the right lessons from the pandemicIn the wake of the financial crash in 2008, hopes were high on the left that a bona fide crisis of capitalism would significantly shift the political dial in its favour. Isolated victories and movements aside, it didn’t really happen. Instead, in the early 2010s, the bailout of the bankers was followed by the imposition of austerity across Europe and in America as governments sought to balance the books.Premature predictions on the nature of post-Covid politics in the west are therefore to be avoided. But certain themes do seem to be emerging. Sketching out broadly communitarian territory, they chime with many people’s experience of how the pandemic played out and what it exposed; and there is some evidence that, in northern Europe, they might inform a revival and renewal of centre-left parties and movements. Continue reading...

Cryptocurrencies are a baffling entity but adopting it as legal tender is the strangest, most worrying aspect of allEl Salvador this month became the first country to adopt a cryptocurrency – in this case, bitcoin – as legal tender. I say the first, because others might follow. But they should think twice, because the idea is highly dubious – and likely to be economically dangerous for developing countries in particular.I will admit that I don’t understand the need for cryptocurrencies at all. Like many economists, I fail to see what problem they solve. They aren’t well designed to fulfil any of the classic functions of money – a unit of account, store of value, or means of payment – because their prices are so extraordinarily volatile. This volatility is not surprising, because cryptocurrencies are backed neither by reserves nor by the reputation of a well-established institution, such as a government or even a private bank or other trusted corporation. Continue reading...

Nuclear-capable bombers entered air defence zone, says Taipei, amid simmering row over competing bids to join regional trade agreementChina has voiced opposition to Taiwan joining a major trans-Pacific trade deal as it flew 24 planes – including two nuclear-capable bombers – into the self-ruled island’s air defence zone, the biggest incursion in weeks, Taiwanese officials said.Last week Beijing submitted its own application to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Continue reading...

Inflation expected to rise ‘slightly over 4%’ in the final quarter of this year, as energy and goods prices surge

Analysis: Threadneedle Street is adopting a wait and see policy and keeping interest rates unchangedHigher energy prices will send the annual inflation rate above 4% by the end of the year and keep it there well into 2022. On the face of things, the Bank of England is asleep at the wheel and should be taking steps to ease growing price pressures.It is not quite so simple as that. The minutes of the latest meeting of Threadneedle Street’s monetary policy committee show the Bank opposed immediate action, with only two of the nine members voting to halt the money creation programme known as quantitative easing (QE). All nine backed keeping official interest rates unchanged at 0.1%. Continue reading...

Interest rates kept at 0.1% as worker and material shortages slow Britain’s economic recovery from pandemicThe Bank of England has warned surging household energy bills will drive inflation above 4% this winter, with persistent pressure on living costs expected to last through to the middle of next year despite a slowdown in the economy.Voting unanimously to keep interest rates at the historic low of 0.1%, the Bank’s monetary policy committee (MPC) warned severe shortages of workers and raw materials were weighing on Britain’s economic recovery from lockdown. Continue reading...

Firms battling stock and worker shortages with Brexit cited as exacerbating pandemic issuesSevere shortages of workers and supplies have dragged down economic growth in Britain to the weakest levels since pandemic restrictions were eased in March, according to a closely watched business survey.The latest snapshot from IHS Markit and the Chartered Institute of Procurement and Supply (Cips) showed that growth in private sector output slowed in August as firms battled with severe shortages while costs rose at the fastest pace since the late 1990s. Continue reading...

Downgrade by Fitch reflects jitters in markets as boss of Asia-focused bank HSBC says problems ‘concerning’Ratings agency Fitch has downgraded its forecast for China’s economic growth because of concerns about a slowdown in the country’s colossal housing market and fears about struggling property giant Evergrande.China enjoyed a swift economic rebound from the Covid-19 pandemic, but strict new rules on the country’s developers have caused a deleveraging rush and helped push housing giant Evergrande to crisis point. Continue reading...

Rolling coverage of the latest economic and financial news

The combined challenges of an economic slowdown, rising energy costs and the transition to net zero loom over this governmentLong before there was talk of an energy crisis, the government had been looking vulnerable. Economic growth is slowing and inflation is rising. Despite the Indian summer, Covid-19 infection rates remain high, and the warm weather won’t last for ever.The prop provided to the labour market by the furlough scheme will be kicked away at the end of the month, and nobody can be sure of how that will affect the businesses that have grown used to the wages of their staff being met by the state. Millions of struggling people are about to become £20 a week worse off when universal credit reverts to its pre-crisis level. There will be tax increases next spring to bring down NHS waiting lists.Larry Elliott is the Guardian’s economics editor Continue reading...

Australian Strategic Policy Institute says Coalition should take pre-emptive action with global trade umpire in case demand for commodity dries up

From the warped housing market to the ‘knowledge economy’, the system increasingly works only for the uber-wealthyI travelled to New York City in August for the first time since the pandemic began, to visit friends who had just bought their first home. They are firmly upper-middle class and in their 40s. They took out a mortgage for $1.5m (£1.1m) to buy a place in a Brooklyn neighbourhood that was regarded until recently as an area immune to gentrification. So far, so typical. Asset ownership comes late these days.On the second day of my visit I saw a group of twenty- and thirtysomethings sitting together in a local park (of the type illuminated by sodium lights to discourage drug dealing). They had gathered around a banner announcing a meeting of the local tenants’ rights union. Almost every member of the group looked as if they could have featured in the pages of an Ivy League magazine. All bar one were white. Their neighbourhood was not.Mark Blyth is a political economist at Brown University Continue reading...

Economic observers should heed the warnings now – rising prices and slowing growth are a very real threatHow will the global economy and markets evolve over the next year? There are four scenarios that could follow the “mild stagflation” of the last few months.The recovery in the first half of 2021 has given way recently to sharply slower growth and a surge of inflation well above the 2% target of central banks, owing to the effects of the Delta variant, supply bottlenecks in both goods and labour markets, and shortages of some commodities, intermediate inputs, final goods, and labour. Bond yields have fallen in the last few months and the recent equity-market correction has been modest so far, perhaps reflecting hopes that the mild stagflation will prove temporary. Continue reading...