Annual meeting of world leaders, billionaires and business chiefs had been scheduled for January

The questions which will determine whether families feel the pinch this Christmas and beyond are all up to the chancellorEconomic commentators and investors all have their eyes on inflation, and the unexpected decision by the Bank of England to raise interest rates, for the first time in three years, to 0.25% – in spite of the disruption and uncertainty of Omicron. But behind the headlines and the focus on the Bank, the biggest macroeconomic questions facing the UK – which will determine whether families feel the pinch this Christmas and beyond – are all up to the chancellor.Inflation has reached its highest level in a decade, at 5.1%. Yet this isn’t inflation of the 1970s kind, still raised as an economic bogeyman to stoke fear of “wage-price spirals”. The governor of the Bank of England has said there is little risk of this. Inflation is, in fact, outstripping pay rises – so average pay packets are shrinking in real terms.Carys Roberts is executive director of the Institute for Public Policy Research Continue reading...

Visits to retailers over last weekend before holiday fail to fulfil hope of windfall after pandemic strugglesShoppers have pulled back from UK high streets in the crucial final weekend of shopping before Christmas, figures reveal, as the retail and hospitality sectors continue to struggle amid fears over the spread of the Omicron coronavirus variant.The latest data from retail intelligence firm Springboard showed that visits to retailers around the UK on Saturday and Sunday were up just 0.8% and down 1.8%, respectively, compared with a week earlier, reversing the usual trend for footfall to soar ahead of the big day. Continue reading...

As the value of the lira plummets and inflation soars, Turkish citizens are struggling to adapt and surviveIn a jewellery shop close to Istanbul’s Taksim Square, Seda unzips an elegant black leather pouch and piles her gold jewellery on the counter to discuss selling it all. The shop owner gently places gold chains, rings and a pendant on a small scale, before immediately calling a trader to discuss the latest rates.“I used to look at the price of gold once a week. Now I look roughly 50 times a day,” says the owner, who asks that his name is withheld. He advises Seda to wait – perhaps the price will stabilise. Continue reading...

Boris Johnson’s cabinet is caught once more between doing the right thing and doing the ideological thingIt’s shaping up to be all too familiar. A worsening outlook in the pandemic, a government slow to react, and confidence fading fast among businesses and households.In many ways Christmas couldn’t come soon enough for Boris Johnson’s government, amid a storm of bad news as the prime minister’s Teflon ability to survive political scandal appears to be deserting him at last. But rather than acting as a distraction, the festive period merely highlights the serious problems facing the British economy that could make matters worse. Continue reading...

It makes no sense to switch from caution to abruptly increasing borrowing costs when Omicron endangers the economyAfter months of hand-wringing and flip-flopping, the Bank of England has settled on a plan. Following a whopping eight-to-one vote in favour at a meeting last week, the monetary policy committee decided the pandemic was over and now was the time to begin pushing interest rates back to pre-Covid levels.The decision to become the first major central bank to raise interest rates since Covid-19 struck in 2020 was greeted with a whiff of derision in some parts of the City. Continue reading...

As some bottlenecks ease others are just starting, meaning the post-pandemic economy ‘won’t return to normal any time soon’In Britain it’s alcohol, in Canada it’s maple syrup, while in Australia it’s a crucial additive for diesel trucks, and in New Zealand it’s brown sugar. These are just some of the many shortages affecting consumers and businesses around the world as industry experts warn that the supply chain crisis prompted by the coronavirus pandemic could last for many more months and even up to two years.Although there are signs that some bottlenecks are easing, the onset of the Omicron Covid variant could lead to new shutdowns, sending another disruptive spasm through the global system. Continue reading...

Omicron fears and earlier Christmas shopping dampen festive mood for retailers as some stores bring forward Boxing Day salesVisits to high streets and shopping centres have fallen ahead of what is traditionally the biggest shopping weekend of the calendar, with a 20% fall in central London footfall on Thursday prompting forecasts of a “muted” end to a turbulent year.Retailers including Harrods and Halfords have brought forward Christmas sales in a bid to entice shoppers, but outlets hoping for a last-minute spending frenzy look set to be out of luck, as fears over the Omicron coronavirus variant keep many at home in the final run-up to Christmas. Continue reading...

The UK house price boom is likely to end next year, while retail sales were boosted by Black Friday and early Christmas shopping

Analysis: In purely economic terms the first post-Brexit trade deal negotiated from scratch will save each UK household £1 a yearCheaper Jacob’s Creek and Hardys wines, Tim Tams and surfboards for Britain, cut-price Scotch, cars and clothing for Australia. While things might not be going so well for the England cricket team in Australia, the UK government is talking up Anglo-Aussie relations.Almost six months on from an agreement in principle, the UK and Australia have signed a free trade deal described as “historic” for its status as the first negotiated from scratch since leaving the EU. Continue reading...

Industry welcomes decision not to raise fares above July’s RPI inflation rate as some had fearedRail fares in England are to rise by 3.8% in March, the government has confirmed, in line with July’s RPI inflation rate and the biggest increase in nine years.The latest increase – revealed in the Guardian after a leak this month – is less than some feared after fares went up above the RPI inflation rate in March of this year. Continue reading...

Figures reveal impact of Brexit and pandemic, with £2.7bn fall blamed largely on 24% drop in sales to blocUK food and drink exports fell by 16% in the first nine months of 2021, according to industry figures that revealed the devastating impact of Brexit and the pandemic on the value of trade.The Food and Drink Federation (FDF) said the sector’s exports declined by £2.7bn between January and September compared with pre-pandemic levels, a drop it blamed largely on a 24% decrease in sales to EU countries. Continue reading...

Turkey’s president to hike minimum wage by 50% with other measures to come in attempt to stabilise currencyTurkey’s president, Recep Tayyip Erdoğan, has vowed to take on the currency markets after a fresh cut in his country’s interest rates sent the lira plunging to its lowest ever level against the US dollar.Erdoğan said Turkey’s destiny would not be determined by the level of borrowing costs or by foreign exchange speculators despite signs his unorthodox approach to running the economy was leading to rapidly rising inflation. Continue reading...

Rolling coverage of the latest economic and financial news

Flash estimate of activity since Covid variant’s arrival reveals a marked impact on service sector

Analysis: on this occasion the MPC has decided the threat of inflation becoming embedded is greater than the risk to growthThe Bank of England is making a habit of pulling surprises. In November, financial markets were taken aback when Threadneedle Street kept interest rates on hold at 0.1%. This time they were caught on the hop by the decision to raise them to 0.25%.It’s not hard to see why traders in the City have been left scratching their heads given that the explanation for doing nothing in November – uncertainty about the real state of the economy – seems to apply just as much to today’s circumstances. Continue reading...

The lowdown on how the Bank of England decision will affect borrowers and saversThe Bank of England has increased interest rates to 0.25% from the historical low of 0.1% in an attempt to tackle rising inflation in the UK, but what does that mean for the public? Continue reading...

Inflation spike prompts MPC to vote for increase despite fears for UK economy from surge in Omicron casesThe Bank of England has unexpectedly raised interest rates for the first time in three years amid growing concerns over inflation, despite the rapid spread of the coronavirus Omicron variant.Threadneedle Street’s monetary policy committee (MPC) voted by a majority of eight to one to raise rates from the historic low of 0.1% to 0.25%, judging that pressure on households from surging living costs outweighed the risks to the economy from the new variant. Continue reading...

Shares plunge as ‘exceptionally high’ rate of customer returns linked to renewed popularity of dresses dents salesThe fast fashion group Boohoo has warned that full-year profits and sales will be lower than expected after being hit by more customers returning clothes, delivery disruptions and surging costs.Shares in the online clothing retailer plunged 15% in response to its second warning in four months, despite its insistence that the current difficulties facing the business were mostly related to the pandemic and therefore “transient in nature”. Continue reading...

Colourful kokina heralds the holiday season – and a financial lifeline for those facing runaway inflation and discriminationWhen flower vendors put out the red and green kokina on the streets, holiday season has arrived in Istanbul.Widely believed to have begun as a Christmas tradition of Turkey’s Greek community, kokina is made by tying together two different plants that grow in the wild, and looks like a picture-perfect version of holly. Its name comes from the Greek for red. Continue reading...

Central bank will double rate at which it cuts spending on government bonds and expects to raise borrowing costs next yearThe US Federal Reserve has announced that it will accelerate an end to the central bank’s pandemic-era support of the US economy in a major shift that will also see a series of interest rate rises next year.The measures are a signal that US central bankers no longer view rising inflation as a “transitory” nuisance caused by supply chain problems meeting pent-up consumer demand, but an issue that now requires firm management to avert lasting damage to the US economy. Continue reading...

Rolling coverage of the latest economic and financial news

NIESR’s management offered an increase worth 2% while latest data shows cost of living is up 5.1%Asking workers to stomach a below-inflation pay rise is never popular. Asking them to do so when their day job is forecasting the cost of living is really asking for trouble.And so it has proved at the National Institute for Economic and Social Research. A strike ballot opened on Wednesday for members of the Unite union after the NIESR’s management offered a basic pay deal worth 2%. It comes after wages were frozen last year. Continue reading...

Analysis: Bank of England faces tough call as apple prices rise by 25% and Omicron cases increase

As inflation rises to its highest rate in a decade, we look at the implications for consumers, savers and interest rates

Increase to 5.1% in November puts further pressure on Bank of England to raise interest rates

House prices, sales and construction all fell in November as Shimao Group shares plunge and Beijing assesses what to do with EvergrandeChina’s giant housing market has continued to decline in the past month and another major developer showed signs of financial distress as state-owned enterprises began carving up the carcass of the failing property giant Evergrande.House prices, sales, investment and construction data released on Wednesday all showed renewed signs of the crisis in the market, which accounts up to 30% of the country’s output and which appears certain to drag on the world’s second biggest economy. Continue reading...

People investing in the cryptocurrency should be aware of risks, central bank saysThe Bank of England has said that bitcoin could be “worthless” and people investing in the digital currency should be prepared to lose everything.In a warning over the potential risks for investors, the central bank questioned whether there was any inherent worth in the most prominent digital currency, which has soared in value this year to close to $50,000 (£37,786) a piece. Continue reading...

Rolling coverage of the latest economic and financial news

Exclusive: Chancellor said to not have opposed jab regime but warned of spending cuts or tax rises to pay for it

Economic body says Britain has dealt well with Covid-19 but new variant poses a new threatThe chancellor, Rishi Sunak, should be drawing up contingency plans for a mini-furlough in the event that the Omicron variant forces the government into closing parts of the economy, the International Monetary Fund has said.In its annual health check of the UK, the IMF warned the fast-spreading mutation of the Covid-19 virus posed a fresh threat to the economy after what had been a “challenging year”. Continue reading...

Jobless rate falls to 4.2% as number of workers on company payolls rises by 257,000Unemployment in the UK fell in October despite the end of the furlough scheme, according to official figures, as companies continued to hire amid record numbers of staff vacancies.The Office for National Statistics said the unemployment rate fell to 4.2% in the three months to the end of October, representing about 1.4 million people, down from 4.3% in the three months to the end of September. Continue reading...

Bank wants to scrap rule that borrowers must be able to afford rate rise of three percentage pointsThe Bank of England has announced plans to ease mortgage lending rules in a move that could help thousands of first-time buyers get on to the property ladder.The central bank said it wanted to remove a requirement that forces borrowers to be able to afford a three-percentage-point rise in interest rates before they can be approved for a home loan. Continue reading...

Rolling coverage of the latest economic and financial news

Paul Volcker’s shock therapy in the 80s hollowed out American manufacturing and permanently boosted both Beijing and Wall StreetDown the ages there has been no shortage of central bankers intent on squeezing inflation out of the system, but Paul Volcker is in a class of his own.Appointed by Jimmy Carter in 1979 when the US annual inflation rate was well into double digits, Volcker administered brutal shock treatment to the world’s biggest economy, at one point pushing official interest rates above 20%. Fans of the 6ft 7in (2.04m) chairman of the Federal Reserve continue to be in awe of his single-minded approach to price stability. Volcker is the inflation hawks’ hawk. Continue reading...

Voters can spring surprises at any time. This is not a time for Remainers to despair. It is never time for thatDuring the closing stages of Margaret Thatcher’s premiership, I said to the Conservative MP John Biffen: “I think Mrs Thatcher must be suffering.”This was surprising, coming from such a long-term critic of Thatcherism as myself, but so was the reply from Biffen, a former member of her cabinet and also, for years, her leader of the Commons. “Yes,” he replied, “but is she suffering enough?” Continue reading...

Despite new restrictions, some experts say rising inflation and vacancies are good reason for the Bank of England to take a lead this weekThere is a contrarian view of Britain’s economic outlook. Those who subscribe to it argue that despite fresh government restrictions to combat the Omicron variant, the recovery is robust and the Bank of England will have to raise interest rates when it meets this week.It is a minority view in the City, but it could find favour inside Threadneedle Street when members of the nine-strong monetary policy committee (MPC) gather, and bring a surprise increase in the base rate from 0.1% to 0.25%. Continue reading...

A new study on the movement suggests that its abiding legacy might be as an insultNo one admits to being a “neoliberal”. You cannot vote for the Neoliberal party or join a neoliberal club. Like 21st-century fascism and religious fundamentalism, neoliberalism is a movement without declared adherents.If you call opponents “fascist” or a “fundamentalist”, however, at least your audience knows you are condemning them. A “neoliberal” though? Most people won’t know what you are talking about, but will guess that it doesn’t sound such a bad thing to be. The exceptions will be the minority immersed in leftwing thought. They alone are primed to shudder at the sound of the word. Continue reading...

Supply chain disruptions have left many UK households waiting months extra for deliveries of sofas and tablesThe £800 Townhouse dining table is an “elegant, sturdy classic” built for gathering round. Marsha Moore’s £20 melamine camping table, with a surface area of less than a square metre, is not, and certainly not where she imagined eating Christmas dinner.But Moore, a writer who recently moved into an unfurnished flat in London with her husband and son, is one of many Britons trapped in a furniture nightmare before Christmas after deliveries of key pieces such as sofas, tables and beds were delayed by supply chain disruption. Continue reading...

Consumer prices across America have risen at their fastest annual pace in almost 40 years, driven by pricier energy, food and housing

October GDP increase of only 0.1% weaker than expected, with number of people dining out falling

For six months in a row prices increased across many sectors, including gas, food and housingThe US inflation rate rose 6.8% over the last year, the highest increase since 1982, the Bureau of Labor Statistics reported Friday morning.Inflation rose 0.8% in November after rising 0.9% in October. Price increases were seen across many sectors, including gas, food and housing. This is the sixth month in a row the US is seeing price increases. Continue reading...

Analysis: growth was weakening before Omicron emerged to put more pressure on businesses and homes

Economists don’t see a return to recession – but consumers staying at home is likely to have a big impact on some sectors

No government has openly embraced modern monetary theory, but many of the radical doctrine’s core principles are informing today’s policy decisionsToday, citizens are unwitting participants in a covert policy experiment. It embraces the idea of higher government spending without the necessity of increased taxes. While modern monetary theory (MMT), the doctrine, has obvious appeal for politicians, irrespective of economic religion, the long-term consequences may prove problematic.A state, MMT argues, finances its spending by creating money, not from taxes or borrowing. As nations cannot go bankrupt when they can print their own currency, deficits and debt don’t matter. Accordingly, governments should spend to ensure full employment, guaranteeing a job for everyone willing to work. Alternatively, though not formally part of MMT, governments can fund universal basic income (UBI) schemes, providing every individual an unconditional flat-rate payment irrespective of circumstances. Continue reading...

Rolling coverage of the latest economic and financial news

Fears of economic slowdown mean Bank of England less likely to intervene to dampen inflation

Lowe outlines ways tokens rather than dollars might circulate in Australia but is ‘sceptical’ of cryptocurrencies for general payments

Xi Jinping’s mission is not only to control the housing bubble, but rein in untethered industries and foreign capitalChina’s economy has become heavily dependent on property development over the last decade. High-rise apartments have mushroomed across hundreds of cities to house a growing white-collar workforce, while glass and steel office blocks are dominating city centres, mimicking Shanghai’s glittering skyline.Valued at more than $50tn after 20 years of rapid growth, Chinese real estate is worth twice as much as the US property market and four times China’s annual income. Continue reading...

Rolling coverage of the latest economic and financial news