City economists predict further cut in November, after first reduction in UK interest rates since 2020, as Bank lifts its growth forecast for this year

Incremental cuts likely over two to three years with rates expected to stay well above pre-Covid levels of 0.75%

Too many nations, including China and India, are relying on outmoded strategies to become advanced economies, says report

From mortgages to savings and from loans to credit cards, we look at impact of quarter-point cut to base rate

Emergency cuts, empty pockets, a maxed-out credit card': why is Rachel Reeves using the language and logic of austerity?A spectre is haunting Rachel Reeves. It has the tonsure of an abbot and a jawline kept taut by intermittent fasting, but any trace of asceticism is dispelled by its perma-smirk: a half-smile, half-jeer that taunts I've got one over you!" It is the spectre of George Osborne.I am not the only one to see his shade. Other commentators have observed this week how the new chancellor has copied her predecessor's trick of beaming over the threshold of No 11, before scowling like Captain Renault and claiming to be Shocked! Shocked! at the debauchery inside.Aditya Chakrabortty is a Guardian columnist Continue reading...

Chair Jay Powell says central bank getting closer to the point' of possible rate cut - but we're not quite there yet'The US Federal Reserve announced on Wednesday it will hold interest rates steady, though officials hinted at optimism that rates could be cut later this year.Interest rates are set by the Fed's federal open market committee (FOMC), which meets eight times a year and will next meet in September. Continue reading...

Live coverage of business, economics and financial markets as 64-year-old aerospace veteran becomes latest boss tasked with turning around US manufacturer's fortunesDaniel Kral of Oxford Economics questions if the small dip in Eurozone services inflation will be enough to persuade the European Central Bank to continue cutting interest rates.He points out that it has stayed sticky at about 4% during all of 2024. That is not a sign that inflationary pressures are cooling in Europe's economy. Continue reading...

Shadow chancellor says successor confected story of black hole' to distract from tax rises, but things are not clearcutRachel Reeves has accused Jeremy Hunt, her predecessor as chancellor, of lying about the state of the public finances inherited by the Labour government. Hunt has dismissed the claims as absolute nonsense". Continue reading...

Rolling coverage of the latest economic and financial news, including growth figures from across the eurozoneShares in drinks giant Diageo have sunk to the bottom of the FTSE 100 leaderboard, down 8%, after reporting a drop in sales and profits.Diageo, whose brands include Johnnie Walker, Captain Morgan, Guinness, Smirnoff and Baileys, posted a 1.4% drop in reported net sales in the year to the end of June, to $20.3bn.Fiscal 24 was impacted by materially weaker performance in LAC [the Latin America and Caribbean region].Excluding LAC, organic net sales grew 1.8%, driven by resilient growth in our Africa, Asia Pacific and Europe regions. This offset the decline in North America, which was attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year. Continue reading...

The government's popularity may pivot on Wednesday's CPI figures and a pre-Christmas poll would be a prospect if it viewed the RBA's job was done

Analyst says eurozone could have turned a corner as it avoids recession with 0.3% growth

In today's newsletter: The new chancellor announced a series of public spending cuts, blaming the previous government while also looking to their playbook Sign up here for our daily newsletter, First EditionGood morning.During the election campaign, Labour said economic growth would fund their pledges, despite warnings from economists that their sums did not add up. Many said that the next government would have to either cut spending, raise taxes, or abandon certain pledges. That prediction seems to be coming to bear.UK news | Two children have died and nine have been injured, six critically, after a series of stabbings at a children's dance class in Southport on Monday. Two adults are also in critical condition after what police described as a ferocious attack". The stabbings took place at a Taylor Swift-themed yoga and dance class at a studio in the north-west seaside town.US news | Republican presidential candidate Donald Trump has defended Senator JD Vance's past comments, in which he called Kamala Harris and other Democrats childless cat ladies", saying that Vance was simply trying to show how much he values family life.Media | The former BBC presenter, Huw Edwards, has been charged with three counts of making indecent images of children. Edwards, who left the BBC in April, will appear at Westminster magistrates court on Wednesday on charges relating to images shared on a WhatsApp chat.Middle East | A frantic diplomatic push to deter Israel from striking Beirut in response to a deadly rocket attack on the Golan Heights was under way on Monday, as the governments of the UK, Germany, France and America issued travel warnings to their citizens, calling on them to leave Lebanon or avoid travel there.Transport | HS2 has revealed more than 2bn in costs linked to Rishi Sunak's decision to downgrade the high-speed rail line. The UK's largest infrastructure project revealed that it had written off 1.1bn in costs incurred during phase two", which was due to link Birmingham to Manchester. Continue reading...

The chancellor's initial cuts must be followed by an autumn budget that taxes the richest and focuses on growthThat was authentic anger, Rachel Reeves's indignation well justified as she thundered in the Commons at the inheritance she has been left. Labour is genuinely outraged at the destruction the former chancellor Jeremy Hunt deliberately inflicted, knowing his party would be out of there for years to come. They did indeed put party before country", as she said, by cutting tax without having the funds to pay for their promises. The Treasury's audit shows her victorious battlefield strewn with landmines: unfeasible commitments for Boris Johnson's fantasy 40 new hospitals, roads without budgets, every public service burned out and councils everywhere tipping into bankruptcy. This was not mere fecklessness but deliberate sabotage, an act of treason against the country.That Tory wreckage will stay vividly imprinted in the public memory. All that matters now is how to find the resources to breathe renewal and growth into the national decay all around us. The depth of the dishonesty in this year's budget meant she made tough cuts in-year: the winter fuel allowance made no sense for pensioners not on benefits. Social care charging caps, endlessly delayed, will not go ahead: the idea needs to be wrapped up in a better future reform. She will pay all public employees the raise they deserve, though this is still behind the private sector. Cutting 3.2bn shared between every cabinet minister's budget looks too harsh after the starvation years: what efficiency" savings could there be? Continue reading...

Figures show weak consumer demand persisted in June and July as Bank of England ponders interest rate decisionUK consumers have cut back on summer spending amid the impact of poor weather and the cost of living crisis, figures show, underscoring the challenge for the Bank of England ahead of its interest rate decision on Thursday.In a sign of weakness in consumer spending over the summer months, figures from the British Retail Consortium (BRC) show that clothing and footwear prices fell for the seventh consecutive month in July as weak demand persisted. Continue reading...

Larger number of homes for sale will help push up prices by 2%, says property portalHouse prices are expected to rise over the second half of the year across the UK, according to a forecast, with the market bolstered by more people selling their homes. Prices are likely to increase by 2% towards the end of 2024, Zoopla has predicted.The improved outlook for the housing market was the result of an increased number of homes for sale, the property portal said. The number of sales agreed in the four weeks to 21 July was 16% higher than the same period a year ago and the average estate agent had more homes for sale than at any point in the past six years. Continue reading...

Measures include cutting winter fuel payments for wealthier pensioners and shelving cap on social care paymentsRachel Reeves has cut winter fuel payments for 10 million wealthier pensioners as she sought to plug a 22bn black hole in the public finances she said was covered up" by the Conservative government, while hinting at tax rises in her first autumn budget.The chancellor also shelved the long-delayed cap on what people would pay for social care as she ignited a bonfire of Tory policies she said would be needed to deal with the deficit, telling MPs: If we cannot afford it, we cannot do it." Continue reading...

The chancellor was right to call out her predecessors' culpability for a disastrous inheritance. But Labour must be bolderIn his emergency budget" of 2010, delivered a month after that year's general election, the newly appointed chancellor, George Osborne, set out the rationale for an age of austerity that would frame British politics for the next decade. Falsely associating the devastating impact of the global economic crash with Labour spending and borrowing policies, Mr Osborne exploited a crisis to launch a disastrous crusade to shrink the size of the state.On Monday afternoon, in another defining Commons moment, Rachel Reeves also turned on her immediate predecessors, but with more legitimate arguments at her disposal. In a withering analysis, Ms Reeves laid out a 22bn hole" of unfunded commitments for this year, much of it discovered only on opening up the books in office. The outgoing government, which calculated that an election defeat was assured, had made no attempt to make its own sums add up.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...

Chancellor suggests budget, on 30 October, will involve tax rises and cuts to spending and benefitsDowning Street has refused to comment on a report saying junior doctors are being offered a pay rise worth about 20% over two years.In a story for the Times, Steven Swinford reports:The British Medical Association's (BMA) junior doctors committee has recommended an offer that includes a backdated pay rise of 4.05 per cent for 2023-24, on top of an existing increase of between 8.8 per cent and 10.3 per cent.Junior doctors will be given a further pay rise of 6 per cent for 2024-25, which will be topped up by a consolidated 1,000 payment. This is equivalent to a pay rise of between 7 per cent and 9 per cent.As we've said before, we're committed to working to find a solution, resolving this dispute, but I can't get into detailed running commentary on negotiations.We've been honest with the public and the sector about the economic circumstances we face. But the government is determined to do the hard work necessary to finally bring these strikes to an end. Continue reading...

The chancellor's message was: this is going to hurt, but it's not my fault. Haven't we heard that somewhere before?For George Osborne read Rachel Reeves. For 2010 read 2024. The party affiliation might be different but the message from the two chancellors shortly after arriving at the Treasury was the same. In both cases it amounted to two basic propositions: this is going to hurt, and the other lot are to blame.Like Osborne, Reeves said she would not duck tough decisions, and she was as good as her word. Labour's first chancellor in 14 years announced 5.5bn of spending cuts and made no secret of the fact there would be more pain to come in the budget on 30 October. Continue reading...

Live, rolling coverage of business, economics and financial markets as McDonald's faces pressure to cut prices and lure back customersA three month view of Bitcoin prices shows the steady price climb in recent weeks, which was boosted even further on the prospect that Trump would clear regulatory hurdles to the cryptocurrency's ascent.A closer look at the rise in cryptocurrency over the past five days: Continue reading...

Regions' vast potential is being blocked by the need for better investments, key partnerships and reforms to global financeAfter Hurricane Beryl stomped across the Caribbean, days after torrential rainfall destroyed thousands of homes in Ghana and Niger, it was evident that the two regions face many of the same challenges. Weeks of catastrophic events underscore the increasing necessity to transform the world's financial architecture to support these areas.Earlier this summer, two big conferences happened simultaneously, about 7,000 miles apart. One in the Caribbean, Antigua, and the other in Africa,Kenya. The themes were similar: the financial conundrum and developmental crises plaguing the regions. Continue reading...

Chancellor will announce pause in work on a number of infrastructure projects, saying Conservatives covered up' true state of finances

More UK companies are about to trial a four-day week, and all employees could soon get the right to switch off. It's still just baby stepsIn ancient Greece, Aristotle was big on noble leisure", but modern Greece might need a refresher, having just introduced a six-day, 48-hour working week. Opponents have described the measure as barbaric", an erosion of workers' rights in a country that already works the longest hours in Europe.I have been thinking a lot about work recently. OK, I am not exactly formulating an incisive critique of the labour market (most of my thoughts are of dinner or pigeons), but I have been wondering why we still do so much of it. Continue reading...

This week's Bank meeting is unlikely to bring borrowers any joy amid a strong recovery from 2023's mild recessionSavers are always on the lookout for the best interest rates and the UK seems like a good bet at the moment. In recent months, the pound has climbed in value against the euro and the dollar as economists speculate that UK interest rates will remain at 5.25% for longer than previouslyexpected.While the odds of a cut in borrowing have shortened, with a narrow majority of City analysts expecting a reduction, few outside the Square Mile believe a change is imminent. Continue reading...

Labour has enough goodwill with City to increase debt if the money is used for key infrastructureRachel Reeves is preparing to throw the kitchen sink at the Conservatives. To howls of predictable outrage from the opposition benches, the chancellor will tell the Commons on Monday that Labour's inheritance is far worse than anyone could have imagined, backed up by a Treasury audit showing 20bn in spending commitments left unaccounted for by the previous government.Despite the old Tory promise to fix the roof when the sun is shining", made way back in 2010, it has been clear for years that nothing of the sort happened. Reeves can hardly feign shock that the national debt is at the highest level since the 1960s, public services are crumbling and living standards have gone backwards. Continue reading...

Steve Reed hits out at Conservatives' handling of public services as chancellor prepares to detail 20bn black hole'The last Conservative government deliberately covered up" the true state of public finances, a cabinet minister has said, as the chancellor prepares to detail a 20bn black hole" in the public finances.The environment secretary, Steve Reed, said his cabinet colleagues always knew" the inheritance from the Tories was going to be bad", but that since coming to office they had found additional pressures" that had not been disclosed. Continue reading...

Cutting public spending to satisfy an arbitrary financial rule conceived in opposition will confine the UK to sluggish growthBritain's public finances are in a desperate state. That is the key message the chancellor, Rachel Reeves, will deliver in a speech on Monday, which she will use to draw attention to a 20bn black hole in the tax and spending plans bequeathed to her by the last government.Critics will say that this should not be news; it was patently obvious that the Conservatives cooked the books before the last election, baking in impossible-to-achieve spending cuts in order to make their plans for the next five years seem plausible. That did not stop Labour adopting the Tories' projections as its baseline, because it suited the party politically. However, Reeves would be entirely correct in arguing that the unenviable inheritance is as much a product of Conservative neglect and incompetence as it is of external shocks, and that Labour could not know the full extent of the fiscal gap until it was in government and had the opportunity to examine the books carefully. Continue reading...

Several factors restrict the Labour government's room for manoeuvre in its agenda for growthThe economic outlook is improving, but a recovery from last year's recession will be long and arduous without a boost to public investment. Continue reading...

Making billionaires pay their fair share into state coffers would allow Starmer's government to effect real change, but soaking the rich is a hard sell for votersRachel Reeves will this week lay out the full cost of Conservative party economic neglect. Initial findings, according to Labour briefings, put the cost of the repair job at about 20bn, though there is also a strong hint that the final bill, when it is announced on Monday, will be much higher.The exercise is a chance for the chancellor to send a message to her own supporters to ease off on demands for extra spending. Reeves will say the Tories' reckless and inept handling has pushed the government's finances further into the red than was previously understood. Continue reading...

Questions over whether plan to spend billions on weapons will work as a tool to spur economic growthEven in a room full of generals from around the world decked in military braid, the arrival of the prime minister causes a stir. At the Farnborough international airshow this week, knots of advisers and armed police surrounded Keir Starmer as he walked through the stalls, occasionally allowing a favoured chief executive or a nervous apprentice into the inner circle.A few words with the prime minister will always be valuable for bosses of big business. But at this year's version of the biennial aviation and weapons show, defence companies in particular were hanging on his words for any hints of the intentions of the first Labour prime minister since 2010. Continue reading...

Rachel Reeves is expected to accept pay review body recommendations in move that could cost up to 10bnMillions of public sector workers are set for an above-inflation pay rise due to be announced by Rachel Reeves next week after more than a decade of austerity.The chancellor is expected to accept the recommendations of public sector pay bodies for pay increases on Monday - a move economists believe could cost up to 10bn. Continue reading...

Rachel Reeves will next week highlight figures showing a tougher picture than Osborne received in 2010

Even as Joe Biden touts strongest economy in the world', nearly three in five Americans wrongly believe US is in recessionThe pace of US economic growth accelerated in the last quarter, remaining unexpectedly resilient in the face of high interest rates and persistent inflation.Gross domestic product (GDP) - a broad measure of economic health - rose 2.8% in three months to June, the commerce department reported on Thursday, ahead of economists' expectations and up sharply from 1.4% in the first quarter. Continue reading...

The emergence of artificial intelligence has pushed the tech sector to all-time highs, but other assets have risen, tooThe US stock market has been on a tear over the past two years. The S&P 500 has increased by roughly 40% since Joe Biden assumed office in January 2021 and, along with the Dow Jones and Nasdaq, is repeatedly setting new records. Moreover, the dollar has strengthened sharply against every major currency, while the price of gold soared to an all-time record of $2,470 an ounce earlier this month.Economists and commentators have struggled to explain these trends. While the increase in gold prices could be attributed to elevated risk perceptions stemming from political and geopolitical uncertainties, this explanation does not account for the booming stock market. Conversely, the decline in the Vix volatility index since 2022 might explain the US stock market rally but not the increase in gold prices. Continue reading...

Bank sets aside just 44m for bad debts and defaults in second quarter amid upbeat outlook

Institute for Fiscal Studies report says interests rate rises have inflicted differing levels of hardshipAs many as 320,000 UK adults have been pushed into poverty by soaring mortgage costs after the sharpest increase in interest rates since the 1980s, a leading thinktank has said.Highlighting the damage caused by Britain's exploding mortgage timebomb, the Institute for Fiscal Studies (IFS) said individuals who needed to renew their home loans or take out new ones in the past two years had experienced a sharp fall in their disposable income. Continue reading...

S&P Global flash composite purchasing managers' index shows July rise for manufacturing and services sectors

The signs are clear that not everything is as rosy in Putin's Soviet-style war economy as Moscow would have us believePresident Vladimir Putin and his authoritarian regime are peddling the false narrative that the Russian economy is strong, and that its war machine is unharmed by western sanctions. This is a lie that must be rebutted. In fact, there are many signs that the Russian war economy is deteriorating. The sanctions and other measures to weaken the Russian economy are effective, but even more can be done. We must continue to increase pressure on Putin's regime and support Ukraine.During the Nato summit in Washington DC, western leaders reaffirmed their commitment to Ukraine's defence. But Russia's war against Ukraine is not only being fought by soldiers on the ground. It is also a war of information, on which the Kremlin spends an estimated $1.5bn (1.2bn) a year, and of economic strength. Putin and his authoritarian regime want us to believe that Russia stands unmoved by sanctions and other efforts made to support Ukraine, freedom and democracy. Thus, it is extremely important that politicians, the media and economic institutions in the west do not take the information coming out of the Kremlin at face value. When taking a closer look at the signals, it becomes clear that everything is not as rosy with the Russian economy as Moscow would have us believe.Elisabeth Svantesson, minister for finance, SwedenStephanie Lose, minister for economic affairs, DenmarkMart Vorklaev, minister of finance, EstoniaRiikka Purra, minister of finance, FinlandArvils Aeradens, minister of finance, LatviaGintar Skaist, minister of finance, LithuaniaEelco Heinen, minister of finance, NetherlandsAndrzej Domaski, minister of finance, Poland

Sales dropped 5.4% last month to a seasonally adjusted annual rate of 3.89m units, the lowest level since DecemberUS existing home sales fell more than expected in June as the median house price set another record high, but improving supply and declining mortgage rates offered hope that activity could rebound in the months ahead.Home sales dropped 5.4% last month to a seasonally adjusted annual rate of 3.89m units, the lowest level since December, the National Association of Realtors said on Tuesday. Economists polled by Reuters had forecast home resales would slip to a rate of 4m units. Continue reading...

The Swedish streaming company said gross margins hit a record high of 29.2% in the second quarter, after cost cuts and growth in subscriptionsThe number of new homes registered to be built across the UK fell by 23% in Q2, compared with the same period last year, the National House Building Council (NHBC) said.The figures are an indication of the stock of houses in the pipeline for construction, since they have to be registered before being built.We know we have a mountain to climb. That is why we're already taking the first steps, starting with an overhaul of our planning system - a reform that will both help build the homes we need and speed up the infrastructure to support them.We are committed not just to an ambitious target for overall housebuilding but the biggest wave of social and affordable housing for a generation. It's a promise that we'll bring back with meaningful housing targets. Continue reading...

With extended life expectancy Britain has wound up an increasingly sick nation - and experts say that this is as bad for GDP as it is for our health

UK business secretary Jonathan Reynolds says it is reasonable" to expect Daniel Kretinsky's 3.6bn takeover of Royal Mail would be subject to government reviewThe UK government will need to raise taxes, increase borrowing or make spending cuts unless it can grow the economy by at least three times this year's expected rate, according to analysis by the International Monetary Fund.Economic growth would need to be around 2.6% in each year of parliament from next April before Labour can claim to have stabilised the public finances.Delivering economic growth will require tough choices and difficult decisions.That is why we have already started to take the action necessary to fix the foundations of our economy, so we can rebuild Britain and make every part of our country better off. Continue reading...

Experts say 5.5% pay increase for public sector not consistent' with spending plans that rule out tax risesLabour is fast approaching a moment of truth over its election pledges on tax and spending, experts have warned, after Rachel Reeves indicated the government could agree above-inflation pay rises for public sector staff.The chancellor promised a full statement on pay board recommendations that teachers and NHS workers should receive 5.5% pay awards, ahead of an autumn budget that is set to be one of the most difficult economic balancing acts in years. Continue reading...

Spending on health and education being cut as nearly half of budgets are used to pay creditors, campaigners sayDeveloping countries are facing the worst debt crisis in history with almost half their budgets being spent on paying back their creditors, a study has found.The report, by the campaign group Debt Relief International for Norwegian Church Aid, says more than 100 countries are struggling to service their debts, resulting in them cutting back on investment in health, education, social protection and climate change measures. Continue reading...

High interest rates are needed to reduce wage inflation but productivity improvements are harder to chisel outI'm due a haircut and in the past week received a message from my barber containing the news that the price will be 10% higher than the last time I went for a trim.If I call in for a coffee on my way to work it will be a similar story. After recent price rises, I can expect to pay the thick end of 4 for a flat white. Continue reading...

The new government has promised things will be different: but when it comes to spending, we seem stuck on old Tory policiesThe election campaign mantra of change, change, change" reminded me of those people down on their luck who approach you in the street and ask got any change, guv?"Until this month's welcome result in the polling booths, the Labour party had certainly been down on its luck. From the moment in 2010 when the new chancellor, George Osborne, capitalised on departing Labour chief secretary Liam Byrne's joke that there's no money left", Labour was fighting an uphill battle. Continue reading...

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Treasury says it has received worst postwar inheritance as figures reveal 14.5bn deficit in June

Alan Wenban-Smith on the intersection between wealth creation and making money and Jennifer Highwood on politicians buying seatsTwo excellent articles this week - by Nesrine Malik (Hidden behind the celebration of Labour's landslide' win is a depressing disfranchisement, 15 July) and by George Monbiot (Labour can end austerity at a stroke - by taxing the rich and taxing them hard, 14 July). But while they tease out the dire societal consequences of the economic assumption that making money and creating wealth are mutually supportive, they don't nail this as the original crime. This is ironic since both articles demonstrate the effect of normalising such an assumption: its use in rightwing media to further vested interests, and being baked into public and political discourse.Wealth creation is a broad concept: delivery of the things we need, want or enjoy. It includes things such as a healthy environment and secure social fabric, as well as goods and services. Making money is about establishing a personal claim on marketed wealth, whether produced by ourselves or others. Draw a Venn diagram of the activities in these two categories and it becomes clear that, while there is an overlap, it is very far from being an identity. A current example is provided by the water industry: lots of money is being made, but wealth less so.

Lib Dem leader had declined meeting with campaigner in May 2010, saying I do not believe it would serve any useful purpose'McFadden also told the Horizon IT inquiry of course I wish I had done more" to question the Post Office over its Horizon IT system.In his witness statement, the Labour MP and Cabinet minister said:The Post Office's insistence that the Horizon system was robust and reliable was proven over time to be wrong, with terrible human consequences. Their reliance on court judgments to back up that position was also to be proven wrong in the subsequent court actions that were pursued over the years in order to overturn earlier verdicts.Rereading this correspondence now, and knowing the injustice done to so many subpostmasters, of course I wish I had done more to ask the Post Office if they were really sure their IT system was as robust as they suggested.At the root of all this was the Post Office's insistence that its IT system was robust and not to blame for accounting errors and their willingness to bring prosecutions through the courts over many years.This resulted in many innocent people being convicted or being held liable for debts they did not owe in the civil courts. Continue reading...