Brics nations' plan to create rival to greenback is bound to fail even without president-elect's measuresIn 2023, the leaders of Brazil and the other Brics countries at the time - China, India, Russia, and South Africa - discussed collaboration on a new shared currency. The Brazilian president, Luiz Inacio Lula da Silva, has been a vocal proponent of an alternative to the US dollar, the dominant global currency for the past 75 years, and the Russian president, Vladimir Putin, publicly promoted the idea during the Brics summit in October by brandishing a symbolic Brics banknote. The bloc's new members - Egypt, Ethiopia, Iran, and the United Arab Emirates - would presumably also be included in the new joint currency.The proposed challenge to the dollar has already drawn the ire of the US president-elect, Donald Trump, who has threatened to impose punitive tariffs of 100% on countries that move away from the greenback. At the end of last month, Trump warned Brics countries against creating or supporting an alternative reserve currency. We require a commitment from these countries that they will neither create a new Brics currency nor back any other currency to replace the mighty US dollar, or they will face 100% tariffs," he declared on Truth Social, his social media platform. Continue reading...
CBI survey finds firms planning to reduce hiring amid weakest expectations for growth since November 2022British firms are predicting a sharp fall in business activity in the new year, in the latest economic snapshot to warn of an increasingly gloomy outlook for the UK in 2025.The growth indicator survey from the Confederation of British Industry (CBI) indicates firms are preparing to cut down on hiring and reduce output over the next three months. Continue reading...
Chancellor's visit to EU meeting looks for smoother trade to improve growth but youth mobility scheme remains sticking pointRachel Reeves is seeking a deeper, more mature relationship" between Britain and the EU: this was her central message to the bloc's finance ministers in Brussels a fortnight ago.In her brief speech to the meeting of her European counterparts - the first a UK chancellor had attended since Brexit - Reeves mentioned the UK's relationship with the EU nine times. Continue reading...
The Labour party's determination to stick to Brexit simply condemns the UK to fight a lone hand against the far-right forces ranged against itThe sight of other world leaders toadying up to the US president-elect - the criminal Donald Trump - and his henchman Elon Musk is distasteful enough, but in the world of realpolitik they probably feel they have no option.The great American journalist HL Mencken did not live to see the fulfilment of his 1920 prophecy that one day the White House will be occupied by a downright fool and complete narcissistic moron" but he is no doubt turning in his grave. Continue reading...
Despite spy' scandal, Philip Hammond says Britain should now adopt a pragmatic approach to Beijing'China should be encouraged to build electric cars and renewable energy technology in the UK as part of a new pragmatic trading relationship that would benefit both countries, a former Tory chancellor has said ahead of a landmark visit by Rachel Reeves to Beijing early in the new year.Philip Hammond, who was chancellor from 2016 to 2019, and the last UK minister to take part in formal economic discussions with China before the process was abruptly ended, told the Observer that while Reeves should never compromise security for trade", there were vital economic sectors where deals could be struck. Continue reading...
Nothing seems to stop the relentless march of property values, even with a stamp duty increase loomingIt's been a bumpy ride for the housing market in recent years, after Liz Truss's disastrous mini budget of September 2022 created a surge in borrowing costs that have cost many households dearly.But despite elevated mortgage and rent costs, the market this year has turned out to be surprisingly resilient", according to Nationwide building society. Experts had expected house prices to stay flat or fall, but average prices are expected to have risen by more than 3% in 2024, after falling by 1.4% in 2023. Continue reading...
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...