Governor Andrew Bailey at odds with bank’s chief economist warning of price inflation above 2% targetThe governor of the Bank of England has sought to calm financial market fears over rising inflation but has exposed a policy rift with Threadneedle Street’s outgoing chief economist, Andy Haldane.The day after Haldane used a newspaper article to warn of the need to prevent the “inflation genie” getting out of the bottle, Andrew Bailey said he thought upward price pressures would prove temporary.Related: Top Bank of England economist warns of 1970s-style price inflation Continue reading...

But news from the US means markets are likely to remain twitchy at the prospect of interest rate hikesFlared jeans. Fawlty Towers. Abba churning out No 1 singles. It has been a long time, but the explanation for the severe bout of jitters on global stock markets this week comes down to a word that was on everybody’s lips in the mid-1970s: inflation.Inflation, the preoccupation of prime ministers from Harold Wilson to Margaret Thatcher and of US presidents from Gerald Ford to Ronald Reagan, was considered yesterday’s problem. News this week has forced investors to rethink that comforting assumption. Continue reading...

Andy Haldane says economic recovery will resemble bouncing tennis ball and outpace US this yearBritain’s economy will “power through in the months ahead”, according to a senior Bank of England policymaker, “moving swiftly from bounce-back to boom”.The recovery will resemble a bouncing tennis ball and outpace the US and the rest of the G7 this year, said Andy Haldane, the central bank’s outgoing chief economist.Related: Markets fall again as inflation worries rattle investors – business live Continue reading...

Many investors are right to wonder if the ultra-low interest rates they have been semi-promised until 2023 will materialiseStatistical quirk or a warning of a fundamental change in the inflationary weather? We know on which side of the debate the US Federal Reserve will land. It will take the relaxed view that the sharpest monthly rise in US consumer prices since 2008 – 4.2% – is nothing to worry about.The Fed is committed to keeping interest rates at rock-bottom levels into the middle distance on the grounds that an economy in recovery mode is bound to throw up a few odd-looking pieces of data. Inflation fell a year ago at the onset of the pandemic, so one should not be misled by so-called “base effects”, goes the argument. Don’t risk the recovery by reacting. Continue reading...

New shadow chancellor faces Rishi Sunak in Commons for first time and signals intent to recoup lost votersLabour’s Rachel Reeves made a clear attempt to start reconnecting with the party’s lost supporters by using her debut as shadow chancellor to back British workers and to attack the lack of government action on employment rights in the Queen’s speech.Reeves said a Labour government would introduce measures to tackle low pay, the gig economy and companies’ ability to fire workers and then rehire them on worse conditions. Continue reading...

Shadow of coronavirus beginning to lift from Europe’s economy, says EU’s economics commissioner

Analysis: stronger than expected first quarter means more chunky increases in GDP on cards as Covid controls ease

GDP lifted by 2.1% that month and dropped by only 1.5% in first quarter of 2021

Rolling coverage of the latest economic and financial news

Fund managers tried to vote down Pascal Soriot’s package for fear of more boardroom pay inflationA majority is a majority, but a rebellion of 40% against an executive pay policy is too large to be pinned solely on those brain-dead fund managers who outsource their thinking to proxy voting agencies.At AstraZeneca some serious institutions, with Aviva Investors and Standard Life Aberdeen to the fore, clearly thought the company was pushing things too far by adding a potential £2m cherry on top of their chief executive, Pascal Soriot’s, already substantial pay package. The rebels had a point. Continue reading...

US tech sell-off and report of rising prices for goods leaving China’s factories spook stock marketsFears that central banks will have to abandon their zero-interest rate strategies in the face of mounting inflation prompted steep falls on the world’s leading stock markets on Tuesday.In the UK, the FTSE 100 had its biggest one-day fall since February, closing down 175.69 points at 6947.99 – a drop of 2.47%. The British Airways owner, IAG, was the top faller on the City’s main share-price barometer, down 7.4%, with the engineering companies Renishaw, Melrose and Rolls-Royce also among the the worst performers. Continue reading...

Wealth inequality will rise over the next decade unless death duties also increase, says thinktank

The government has been gradually reducing its holdings in the bank since the 2008 financial crisisThe government has launched the sale of a £1.1bn stake in NatWest to cut the British taxpayer’s holding in the bank, which was bailed out during the financial crisis more than a decade ago.In the second selldown this year, UK Government Investments (UKGI), which manages the shares on behalf of the Treasury, said it would sell 580m shares, representing about 5% of the bank’s stock. Continue reading...

Rolling coverage of the latest economic and financial news

Analysts say SNP’s failure to achieve overall majority in Scottish elections also a factor in highest level against dollar since FebruaryThe fading prospect of an immediate Scottish independence referendum and hopes for a strong UK economic recovery sent the pound higher against the US dollar and the euro on the financial markets.Sterling gained more than 1.5 cents to trade above $1.41 against the US currency for the first time since late February amid relief in the City that the SNP had fallen just short of securing an overall majority in last week’s election to the Scottish parliament. Continue reading...

NIESR says UK facing worse permanent damage than other rich nations due to ‘poor Covid response’Britain’s economy is on track to suffer more than £700bn of lost output caused by Covid-19, made worse by the government’s mishandling of the health emergency and Brexit, one of the UK’s leading economics thinktanks has warned.The National Institute of Economic and Social Research (NIESR) said the UK was facing worse permanent damage than other rich nations due to a “poor Covid-19 response” from Boris Johnson’s government. Continue reading...

For decades, cities had been prioritised as the engine of growth, with London at the apexLet the recriminations commence. In the aftermath of electoral defeat in its former industrial heartlands, Labour is in search of yet another new direction. While much of the focus is on the fundamental shifts in our politics, it is worth remembering the economics underpinning them.Part of the story is about timing. Labour’s punishment at the ballot box comes as most things appear to be going right for the government. There was a time last year when it was a very different scenario, with the botched handling of Covid leading to the highest death rate and worst economic collapse in the G7, ministers doling out contracts to friends, and the chancellor, Rishi Sunak, desperate to make an unemployment crisis worse by closing the furlough scheme.From catastrophe, an unlikely recipe for electoral success has emergedRelated: 2021 election results: latest from local, Scottish and Welsh votes Continue reading...

Key advisers are among those who say scheme is flawed as holiday firms report huge rise in bookings

The bid by top clubs to break away was globalisation at its worst – and emblematic of the UK’s problems beyond sportFour weeks on from what is turning out to be one of the biggest self-inflicted errors by any members of the business elite, the owners of the supposedly top six English football clubs must be wondering how on earth they got themselves into this mess. They are also probably, wishfully, thinking: “Head down, this will all blow over.”Among the numerous fascinating aspects of the European Super League debacle, designed to ram through non-competitive staged events for Europe’s top teams, is that it arrived in the UK – England, specifically – at a time when the government is trying to resurrect its domestic mantra of “levelling up” after 14 months of challenges over Covid-19.The enforcement of proper boards with true independent directors would be an extremely easy step, and a beginning Continue reading...

Markets have been on a dazzling run since Pfizer’s trial results. Now there is reason to worry that things are going too farSix months ago exactly – on 9 November last year – Pfizer unveiled interim data from trials of a vaccine candidate known as BNT162b2, developed in partnership with German firm BioNTech. The numbers were far better than expected: 90% efficacy in preventing Covid.“Today is a great day for science and humanity,” declared Albert Bourla, the company’s chief executive, a judgment that clearly still stands half a year later. Even as the pandemic still rages – appallingly in India, Brazil and many other places – the arrival of effective vaccines has been a turning point in the crisis.Copper and iron prices are at record highs and crude is back at $65 – all before the global recovery has got into its stride Continue reading...

MPs and charities fear a wave of homelessness when landlords can once again legally force out tenants in debt

Booming housing market as ‘incredible demand’ fuels shortage of essentials from concrete and timber to taps and roof tilesUK homeowners face higher bills for renovation work as builders grapple with soaring material costs and shortages of essentials ranging from concrete and timber to taps and roof tiles in a booming housing market.“It is a bit like going to Sainsbury’s and them not having any bread, milk or eggs in,” said Paul Bence, the managing director of builders merchants Bence, of the runaway demand for supplies that is emptying shelves. “Cement is our bread and butter and we would normally keep a good 10 days stock. We would not operate a ‘just-in-time’ model … but that’s effectively where we are right now.” Continue reading...

Rolling coverage of the latest economic and financial news, as the recovery in the US labour market slows unexpectedly

US employees are concerned about safety, others have caregiving responsibilities and some are using their job loss as an opportunity to find other work

Analysis: after catching up lost ground, growth will be relatively swift next year but then slow in 2023If the Bank of England is right, Britain is on course for its strongest annual growth since 1941 – the year of Pearl Harbor and Hitler’s invasion of Russia.The latest forecasts from Threadneedle Street are stronger in every respect than those it came up with three months ago: the hit to growth during the first-quarter lockdown has been less severe, the bounce back will be more rapid, and the peak in unemployment will be significantly lower. Continue reading...

Vaccine rollout spurs fastest monthly rise for seven years with sharp increases in spending and jobs growth

Interest rates to be kept at record low of 0.1% with GDP growth now forecast to rise at 7.25% in 2021Britain is on track for the strongest growth since the second world war this year as it stages a faster-than-expected recovery from the Covid-19 pandemic, according to the Bank of England.The Bank raised its estimate for UK GDP growth to 7.25% in 2021, up from a previous forecast in February for growth of 5% this year, as rapid progress with the Covid-19 vaccine and easing of restrictions paves the way for a boom in pent-up demand.Related: Bank of England raises growth forecasts and leaves interest rates on hold – business live Continue reading...

Rolling coverage of the latest economic and financial news

A cautious approach works for Labour only when the economy is booming – not in times of crisisKeir Starmer approaches his first electoral test since becoming Labour leader – the local and devolved elections on Thursday – with no shortage of advice on how to restore the party’s fortunes. One view is that Starmer must dissociate himself from Jeremy Corbyn’s policy platform and take the party rightwards, back to the moderate centre ground.This argument fits with the standard academic account of Labour’s history since the second world war. Labour’s membership always wants to push the party to the left, but elections are won on the centre ground. So the party faces a constant dilemma, doomed to choose between ideology and electability.Related: An electoral stamp of approval for the Tories risks dishonesty becoming the new normal | Polly ToynbeeMichael Jacobs is professor of political economy and Andrew Hindmoor professor of politics at the University of Sheffield Continue reading...

Rolling coverage of the latest economic and financial news

Throwing money at an already heated market looks nonsensical and could lose the Treasury £2bnSurprise, surprise. Presented, or so they thought, with an end-March deadline to save a few thousand pounds on stamp duty, buyers rushed to complete their house purchases. Mortgage lending in the month reached a new record.It requires no imagination to see what will happen in June, the extended deadline for the £500,000 zero band on stamp duty in England and Northern Ireland – an extension announced very late in the day by the chancellor, Rishi Sunak, in his March budget. There will be a repeat. Then the drama will be replayed in a miniature form in September as buyers try to get on the right side of the taper from £250,000 to £125,000. Continue reading...

Analysis: UK unlikely to win a big deal when Delhi’s big ask is fewer curbs on Indians working in Britain

The advanced economies and China are rebounding from the Covid crisis, but there is a dangerous global divergenceWhat is remarkable about the increase in nationalist sentiment across the developed world in recent years is that it is occurring at a time when many of today’s most pressing challenges, including the climate emergency and the Covid-19 pandemic, are fundamentally global problems demanding global solutions. And the anger brewing among citizens of vaccine-poor countries – basically, the two-thirds of humanity living outside the advanced economies and China – could come back to haunt the rich world all too soon.Joe Biden’s ambitious plans to address inequality in America are to be welcomed, provided the administration succeeds in covering the long-run costs through higher taxes or stronger growth, admittedly two big ifs. So, too, is the smaller but still significant Next Generation EU scheme to help EU members such as Italy and Spain that have been disproportionately affected by the pandemic.Related: India Covid cases pass 20m as calls grow for national lockdown Continue reading...

Consumers repaying credit card debts and manufacturing booms as Covid restrictions ease, new figures showMortgage borrowing in the UK has reached its highest level since modern records began as buyers rushed to beat the now-extended stamp duty holiday deadline.Bank of England figures showed that Rishi Sunak’s decision in the budget to extend the tax break until June did not dampen a burst of activity in the housing market in March.Related: Wallasey in Merseyside tops list of British property hotspots Continue reading...

Downing Street says agreement will create 6,500 jobs and contain £533m of Indian investment in UK

Country Milk’s trade with the EU has nosedived with the dairy industry particularly badly affected by new customs rulesA small error in the paperwork – a box ticked by mistake – and the tanker of butter oil was held at French customs for five days, with veterinary authorities at the border threatening to destroy it. The debacle nearly cost the tanker’s exporter, dairy company County Milk, a six-figure sum. After fraught negotiations, the cargo was eventually repatriated.“You don’t need too many of those to be destroyed and you are in dire straits,” says Phil Langslow, trading director at County Milk, the UK’s largest privately owned dairy ingredients business. Continue reading...

Institute of Economic Affairs argues against raising taxes, saying growth and deregulation will cut borrowingThe government should not worry about its rising debt levels, according to an economic thinktank with close links to the Conservative party that was previously a champion of austerity.In the latest sign that attitudes to public debt may be shifting, the Institute of Economic Affairs (IEA) on Monday published a paper by two economics professors saying that debt incurred during the coronavirus pandemic “can be coped with” and arguing against trying to reduce it too quickly. Continue reading...

As it marks 100 years since its foundation, a look at how the region is doing in education and jobsOne hundred years to the day after its foundation on 3 May 1921, Northern Ireland is outdoing the rest of the United Kingdom on many metrics.The UK’s smallest country has had the lowest unemployment rate on the British Isles for six consecutive quarters, reaching a record low in late 2019; tourism was booming pre-Covid; and it has the highest levels of wellbeing in the OECD. Continue reading...

Legendary investor also warns about share-trading apps and investment Spacs while partner calls cryptocurrencies ‘disgusting’The billionaire investor Warren Buffett has warned of inflation hitting the US economy amid a “red hot” recovery from the worst of the coronavirus pandemic.Buffett said his portfolio companies were “seeing very substantial inflation” in a range of sectors amid shortages of raw materials and high savings among those who kept jobs but were barred from spending on things such as holidays during lockdowns.Related: ‘It’s just the beginning’: Covid push to digital boosts big tech profits Continue reading...

Strong institutions, the right mix of human and physical capital, and sound economic management are keyScotland’s population is similar to that of Norway and Denmark, both countries in the International Monetary Fund’s list of the top 10 richest in the world. So when Nicola Sturgeon says there is no reason why an independent Scotland could not make it on its own after independence, she is absolutely right.All the evidence suggests size really doesn’t matter when it comes to economic success. What does matter is having strong institutions, the right mix of human and physical capital, and sound management of the economy. In their different ways, Singapore, Switzerland and Sweden all have these, which is why they score highly on living standards, educational attainment and longevity.Related: Scottish independence: have we seen these tactics before in Québec? Continue reading...

Boris Johnson and his former aide are locked in a relationship that is still having damaging consequences for all of usBefore he moved on to lower things, Boris Johnson lived in our neighbourhood, just off the Holloway Road in London’s Islington. Another famous Islingtonian who lived off the Holloway Road was the fictional Mr Pooter, protagonist of the Victorian classic Diary of a Nobody.Mr Pooter’s wife was called Carrie, and his close neighbour went by the name of Cummings, of whom on one occasion Pooter writes: “Cummings and I have a little misunderstanding.”It may seem like poetic justice that Johnson and Cummings have fallen out, but the awful truth is that they won the battle to diminish this country Continue reading...

A familiar UK recovery led by a property boom and debt-fuelled consumption does not qualify as ‘building back better’The average house price, according to the Nationwide building society, rose by £6,000 in April, or £200 a day. In the course of the month, the cost of property increased by 2.1% – the highest one-month jump since 2004.Everywhere there are signs of boom conditions: buyers putting in offers without even seeing the property they are after; agents asking for best and final offers well in excess of the asking price; lenders trying to compensate for spiralling prices by offering cheaper home-loan rates and easier terms.Britain has been here many times before and it never ends well Continue reading...

The new president is benefiting not just from bold proposals and actions but from his predecessor’s catastrophic recordBy almost any measure, Joe Biden’s first 100 days have been hugely successful. Getting millions of Americans inoculated against Covid-19 and beginning to revive the economy are central to that success.Related: In his first 100 days, how has Biden handled the four crises he outlined?Even on the fraught issue of race, the contrast with Trump has strengthened Biden’s handRelated: Biden’s ‘transformative’ 100 days in office: Politics Weekly Extra - podcastRobert Reich, a former US secretary of labor, is professor of public policy at the University of California at Berkeley and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a columnist for Guardian US Continue reading...

Trade body says 39,000 jobs are at risk as a direct result of restrictions

The US president is right to spend, but shrinking the federal deficit is not the priorityJoe Biden’s first 100 days in office signalled that the future does not have to be a rerun of the past. The US president’s speech to Congress this week made it clear that Trumpism was a warning from history, a reminder that no republic is guaranteed to last. The US remains in danger – its decline accelerated by an iniquitous economic model, and by leaders unable or unwilling to remedy it. It is a relief to find in the White House a president who wants to bridge divisions rather than widen them. Mr Biden should be praised for saying he will stop the rot and recognising the challenge to democracy posed by autocracy. But his response risks being undone by an obsession with containing non-existent fiscal risks.The Biden White House proposes spending $4trn, with about half the money used to rewrite the social contract. The rest will create jobs, with infrastructure investments to repurpose the post-Covid economy for a zero-carbon world. The problem is not that money is being spent to fix a broken society. Neither is it wrong to ask the rich to pay their fair share of tax. The problem is that Mr Biden says spending must be balanced by tax rises or savings from other government programmes. Continue reading...