It is impossible for wages to drive inflation when they are actually rising slower than inflation

Policymakers have been surprised by stubborn price growth, which they hoped to bring down to 2%, in recent monthsInflation across the US eased slightly last month as concerns about the cost of living loomed over the battle between Joe Biden and Donald Trump for the White House.The closely watched consumer price index (CPI) rose at an annual rate of 3.4% in April, down from an annual pace of 3.5% the previous month. Continue reading...

Ministers ramp up anti-welfare rhetoric a day after data showed increase in UK unemployment

European Bank for Reconstruction and Development cuts growth forecasts for regions it operates in, saying war casting long shadow'Ukraine's war-torn economy faces a renewed threat as Russia's intensifying war takes its toll on power plants and forces Kyiv to send key workers to the frontline, the European Bank for Reconstruction and Development has warned.In its latest economic update, the EBRD cut its growth forecasts and said more than two years of fighting in Ukraine was affecting not only the warring countries but also their neighbours. Continue reading...

Joe Biden announced huge new tariffs on imports from China, in a move that Donald Trump says does not go far enoughJoe Biden has unveiled US tariffs on an array of Chinese imports, unleashing a potential trade war with Beijing, as the president seeks to woo American voters less than six months out from what's set to be a close election rematch with Donald Trump.The new measures affect $18bn in imports, including steel, aluminium, computer chips, solar cells, cranes and medical products - however it is the 100% tariff on Chinese-made electric vehicles (EVs) that has dominated headlines. Continue reading...

Latest UK labour market report shows more people out of work, or economically inactive, but wage growth remains higher than inflation

White House levy to protect US makers from cheap imports likely to inflame trade tensionsThe US president, Joe Biden, has announced a 100% tariff on Chinese-made electric vehicles as part of a package of measures designed to protect US manufacturers from cheap imports.In a move that is likely to inflame trade tensions between the world's two biggest economies, the White House said it was imposing more stringent curbs on Chinese goods worth $18bn. Continue reading...

Failure to cut interest rates will take money out of the system, hitting businesses such as hospitality

Figures provide mixed message for Bank of England when it considers interest rate cut next month

Loyalist economist who thinks years ahead' inherits Kremlin's biggest challenge as it prepares for the long haul in UkraineIn 2014, Russia's bloc of economic strategists was panicked by Vladimir Putin's decision to annex Crimea and foment a war in east Ukraine, a move that led to western condemnation and sanctions against Russia that were seen as potentially ruinous.But his adviser Andrei Belousov was a rare economist who publicly stood by his side, calling the damage manageable and western sanctions insignificant" in terms of the Russian economy. Continue reading...

We know about the hardship of Thatcher's children', but a new generation of Tories has raised inequality to even higher levels

Thinktank says extra funding eaten up by higher inflation despite greater demand with service in poor state of repairSpending on the NHS in England has risen less quickly than the Conservatives promised at the last election despite the extra demand created by the pandemic and record waiting lists, a leading thinktank has said.The Institute for Fiscal Studies (IFS) said increases in funding from the government had been eaten up by higher than expected inflation and, as a result, NHS day-to-day spending had grown by 2.7% a year during the current parliament - below the 3.3% pledged by Boris Johnson in 2019. Continue reading...

Former prime minister proposes 3bn support package for more than 3 million of blighted generation'

Rolling coverage of the latest economic and financial news

Younger homebuyers are turning to ultra-long loans, prompting fears over the risk to their finances and the wider economyFor a long time the traditional length of a UK mortgage has been 25 years, but runaway house prices and, more recently, dramatically higher borrowing costs are prompting more and more people to go long" on their home loans.On Monday, the former pensions minister Steve Webb revealed that younger homebuyers were increasingly being forced to gamble with their retirement prospects by taking on ultra-long mortgages lasting beyond the end of their working life. Continue reading...

MP criticises policies on interest rates and bond-selling as Tory rightwingers call for review of Bank's independenceJacob Rees-Mogg has accused the Bank of England of miserable incompetence" over its failure to reduce inflation more quickly and its bond-selling strategy, as rightwing Tories prepare to renew their attacks on the Bank's independence.The former business secretary accused the Bank of damaging the economy with its interest rate decisions and costing the taxpayer tens of billions of pounds by selling off government debt too quickly in an attempt to reduce its balance sheet - a policy known as quantitative tightening (QT). Continue reading...

Mental health of young people is deteriorating, and shows up in employment data. More action is neededFrom the outset it was obvious the coronavirus pandemic would be brutal on the UK's young people. Just how brutal has only become apparent over time.Children, teenagers and adults in their early 20s were the least likely to have adverse physical consequences but suffered most from the restrictions put in place to prevent the virus spreading. Children were deprived of education. Teenagers were stuck in their homes and unable to see their friends in person. Continue reading...

Experts say Biden can win back working-class Americans if he hammers home the message that he is helping them on pocketbook issuesTo the dismay of Democrats, blue-collar voters have lined up increasingly behind Donald Trump, but political experts say Joe Biden can still turn things around with that large and pivotal group by campaigning hard on kitchen table" economic issues.With just six months to go until the election, recent polls show that Trump has stronger support among blue-collar Americans than he did in 2020. But several political analysts told the Guardian that Biden can bring back enough of those voters to win if he hammers home the message that he is helping Americans on pocketbook issues - for instance, by canceling student debt and cutting insulin prices. Continue reading...

Trade data is a long neglected subject, but it's never been more importantFor most of my career in economic policy, no one asked much about trade data - about developments with imports and exports. The subject just wasn't that controversial.That's all changed since 2016. Brexit has made trade data great again - at least in the sense of reinserting it into the centre of politics. But so far that attention is creating political heat, not the greater understanding we need of where the UK's economy is, and is not, performing. Continue reading...

UK manufacturers and retailers are not yet passing on all the costs of diverting ships round southern Africa - but can that last?When footage first appeared of Houthi rebels hijacking the cargo ship Galaxy Leader in the Red Sea last November, it sent shockwaves through the world of trade.The coordinated attack on the ship, which was partly owned by Israeli billionaire Abraham Ungar, was the start of a six-month campaign by Yemen-based militants to terrorise western vessels using the route, in response to the conflict in Gaza. Continue reading...

A weekend near the former chancellor's French residence induced a sense of wellbeing quite unlike Britain's beleaguered moodWith all the horrors in Ukraine, Gaza and Sudan - not to say (a touch of bathos here) the abysmal state of our Brexit-hit economy - a bank holiday weekend in La France profonde came as a most welcome relief. We were staying with a friend in the south-west region of Aveyron, near a village called La Salvetat-Peyrales.I was struck by the thriving nature of the local rural economy - no potholes in sight - and the general atmosphere of wellbeing. As usual, as on all my trips to the continent, I met people who expressed astonishment at the harm the UK had done to itself with the Brexit referendum. Continue reading...

Charities and campaign groups are calling on bodies to say they may stop funding country if legislation comes into effectThe World Bank and the International Monetary Fund are coming under pressure to use their financial might to persuade Ghana to reconsider a proposed law that could lead to anyone who identifies as LGBTQ+ being jailed for three years.Charities and campaign groups are calling on the global development bodies to tell Ghana they may stop funding the country if the proposed legislation - which will be challenged in the country's supreme court next week - comes into effect. Continue reading...

Short, shallow recession is over, as UK economy grows faster than forecast in January-March quarter, by 0.6%, fastest quarterly growth in over two years

GDP rose by 0.6% in first quarter of 2024 but forecasters expect economy to grow slowly this year

President likely to add sectors such as electric vehicles, batteries and solar cells to range of levies set up under Donald TrumpJoe Biden is expected as early as next week to announce fresh tariffs on Chinese trade, with levies focused on strategic sectors including electric vehicles, in a review of measures first put into place under Donald Trump.An announcement planned for Tuesday will keep the blanket tax rises introduced by the president's predecessor but supplement them with targeted levies on industries connected to EVs, including batteries and solar cells, according to reports. Continue reading...

While the government will seize on any crumbs of comfort it can find, the bigger picture on growth tells a different story

Even as neoliberalism destroys our dreams of a better life, politicians tell us there is no alternative'. But there isThe news should have stopped us in our tracks. Astonishingly, however, it was scarcely reported here. The latest map of mental wellbeing published by the Global Mind Project reveals that, out of the 71 countries it assessed, the United Kingdom, alongside South Africa, has the highest proportion of people in mental distress - and the second worst overall measure of mental health (we beat only Uzbekistan). Mental wellbeing has plummeted in the UK further than in any comparable nation. How was this not headline news?More importantly, why has it happened? The Global Mind Project blames smartphones and ultra-processed food. They doubtless play a role, but they're hardly peculiar to the UK. I think part of the reason is the sense that life here is, visibly and obviously, spiralling backwards.George Monbiot is a Guardian columnist. His latest book, The Invisible Doctrine: The Secret History of Neoliberalism (& How It Came to Control Your Life), is out on 16 May Continue reading...

Bank of England governor Andrew Bailey is briefing reporters after BoE left UK interest rates on hold again in a dramatic 7-2 split

It seems just matter of time before the two MPC members already in favour of a cut are joined off Table Mountain

Policymakers say they want to see more evidence that price pressures are easing before reducing rates

Niesr says current limits on government borrowing fail to stimulate growth and hinder net zero ambitionsThe next government will be forced to hit voters with post-election tax rises and delay net zero investment unless it is prepared to rip up Treasury rules for managing the state finances, a leading thinktank has said.The National Institute for Economic and Social Research (Niesr) called for a radical overhaul of the self-imposed constraints imposed on government borrowing and debt as it warned that persistently weak growth and lower inflation would make hitting the rules more difficult. Continue reading...

The former world bank economist argues that neoliberalism paves the way for populismIn 1944 the Austrian-born economist Friedrich Hayek, displaced to Britain, was disquieted by his leftwing academic peers. As Hayek saw it, their political philosophy committed the same error as the fascism that was ravaging his homeland. He wrote that the desire to plan an economy centrally was - in what became the title of his most famous book - The Road to Serfdom: many who sincerely hate allof nazism's manifestations are working for ideals whose realisation would lead straight to the abhorred tyranny". Hayek cast fascism not as a reaction to progressive success, but as its natural endpoint.Joseph Stiglitz, a former chief economist of the World Bank and adviser to Bill Clinton, tackles this idea head on in The Road to Freedom, his rejoinder to Hayek's work and that of his libertarian fellow traveller Milton Friedman. As Stiglitz sees it, rather than too much government leading to tyranny, the shift to neoliberalism hasreduced freedom and provided fertile ground for populists". Social democracy, with its greater role for the state, generates freer, robust societies that are resilient to authoritarians like former president Donald Trump. Continue reading...

Defence secretary makes statement after 270,000 payroll records belonging to members of Britain's armed forces been exposed to hackers. This live blog is closedReeves says Labour has a vision for the country. Stability will be change, she argues.I know - warm words are not enough. I do not underestimate the challenges we face. But I am so ambitious for our country. I know the huge potential found all across Britain and the constraints that are holding that potential back are not immutable forces.They require vision, courage, and responsible government. Vision - to pursue a different approach, drawing on new economic thinking shaping governments in Europe, America and around the world - but which this Conservative government resists. Continue reading...

Leader of major cybercrime group has been unmasked and sanctioned by the UK, US and Australia, authorities say

Miatta Fahnbulleh is running for parliament - and, as a black female economist, hopes to broaden parliament's outlook on the rules of the game'Miatta Fahnbulleh has been talking about economic transformation for as long as she can remember. After she and her family fled civil war in Liberia as a child, the main topics of conversation around the breakfast table in London were politics and economics.When other people were talking about EastEnders, we were on about changing the economic settlement," says the 44-year-old former chief executive of the New Economics Foundation (NEF), who is standing as Labour's candidate in Peckham, south London, at the next election. Continue reading...

First-time buyers targeting smaller properties, with flats closing growth gap' on houses, says Halifax

Consumer caution over high interest rates and energy bills adds to bleak start to the year for sectorCold wet weather and caution about spending amid high interest rates and energy bills have delivered a dismal start to spring for retailers and restaurants, the latest industry figures show.Sales were virtually flat across March and April against the same period a year ago, according to the latest figures from the British Retail Consortium (BRC) trade body and advisory firm KPMG. That was despite prices continuing to rise with inflation, suggesting a drop in the volume of items sold over the important Easter period. Continue reading...

Tories will crow about falling inflation and Britain's waning recession. But the public sees the reality in its shopping basketLabour's tanks roll relentlessly across Tory lawns, not pausing a heartbeat to celebrate phenomenal local election results in England. It treated the local polls as a military rehearsal for the general election, with ruthless focus on places that will deliver most seats: that includes the south, as well as the north and Midlands, and the party is heading for Scottish turf too.But the mesmerising ferocity of blue-on-blue abuse is the current news-making drama. Fighting bare-knuckle over post-election ideology, the Tory right are looking forward to an election defeat as long as one of their own isn't at the helm. Besides, they have Sunak in their grip, while the Mail calls Boris Johnson a coiled mamba" waiting to save the Tories from total annihilation". Mournful one-nationers echo the losing West Midlands mayor Andy Street's dignified call for moderation, unheeded. Sunak can stay or go: Labour relishes either equally.Polly Toynbee is a Guardian columnist Continue reading...

Bloc will not waver' from making tough decisions to protect economy and security, says Ursula von der Leyen

Jane Dent calls out Labour's hypocrisy about the party. Plus a letter from Tom ParkinRe the letters on the Liberal Democrats losing their way (Letters, 1 May), all I can say is that life is more complicated than the dogma that some espoused. All parties make mistakes and the Lib Dems have not been immune. But please excuse me while I reach for the smelling salts after reading the hypocrisy of the words and actions of Labour and its acolytes. The Lib Dems have been shouting from the rooftops about Brexit, but mealy-mouthed Labour didn't support our attempts to correct the disaster that has befallen Britain in its wake. Now it has also rejected the youth mobility scheme between the EU and the UK.Labour will continue to inflict untold damage if it can't allow itself to talk positively about Europe. It should stop thrashing the Lib Dems and start owning up to its deficits.

Three key economic indicators loom large but none offer great hope for the Conservatives' survivalTory MPs have been busy this past week and probably not found the time to watch Shardlake, the adaptation of CJ Sansom's book set during the dissolution of the monasteries in the 1530s, but once the dust has settled from last week's elections they might want to take a look.This was a turbulent period. Having forced through his own version of Brexit through the break with Rome, Henry VIII then in effect nationalised the assets of religious houses dotted around England, Wales and Ireland. It was a seminal moment in the development of British capitalism and the nation state. Continue reading...

The business and trade secretary played into the ideological tosh that the wonders of the Industrial Revolution were funded by beer brewers and sheep farmersBritain ran an empire for centuries that at its peak 100 years ago occupied just under a quarter of the world's land area. Yet if you believe Imperial Measurement", a report released last week from the rightwing Institute of Economic Affairs (IEA), the net economic impact of this vast empire on Britain was negligible, even negative.If you thought the empire profoundly shaped our industry, trade and financial institutions, with slavery an inherent part of the equation, helped turbocharge the Industrial Revolution and underwrote what was the world's greatest navy for 150 years, think again. The contribution of the transatlantic trade in enslaved people to our economy was trumped by domestic brewing and sheep farming, opines the IEA. The tax burden" of defending this barely profitable empire was not worth the candle. Instead, it was free-market economics that unleashed British economic growth - a truth that must be restated before Marxists and reparation-seeking ex-colonies start controlling thenarrative.Do you have an opinion on the issues raised in this article? If you would like to submit a letter of up to 250 words to be considered for publication, email it to us at observer.letters@observer.co.uk Continue reading...

Reticence over the seizure of Russian state assets in Europe betrays a fatal underestimation of the threat Moscow posesEurope has plotted an elegant decline that suits the needs of its ageing population, and the Ukraine war cannot be allowed to interfere with that plan.That is how it seems when EU countries consider circumventing the financial rulebook to offer Ukraine what it needs to overcome waves of drones and break the deadlock on its eastern front. Continue reading...

The UK is expected to come out of recession, but it would be wise not to expect a reduction any time soonIt would come as a shock to most economists if the Bank of England opted to cut interest rates at its policy meeting this week.Financial markets, which were baying for a cut last May, are these days betting that August or possibly September will be the point at which the Bank starts to lower interest rates from their current level of 5.25%. Continue reading...

April's figure was lower than forecast and unemployment rate ticked up over the month but still market remains strongHiring in the US slowed in April with the workforce adding another 175,000 jobs and wage growth slowing.The news cheered investors hoping that a cooling labor market will prompt the Federal Reserve to cut interest rates - which have been driven to a 20-year high as the US fights stubbornly high inflation. All the major US markets rose on the news. Continue reading...

UK's growth will be least in G7 by 2025, OECD expects, as low business investment and multiple pressures bear down

Rolling coverage of the latest economic and financial news, as the OECD cuts UK growth forecasts to back of G7 pack for 2025

As the fortunes of the super-rich soar, a proposed annual levy of 2% could offer a corrective - and they will fight it tooth and nailThe idea is simple. There are about 3,000 billionaires in the world and in recent years they have been getting richer and richer. Demands on hard-up governments from ageing populations and the drive to achieve net zero are growing all the time. Rather than expect voters already struggling to make ends meet to pay more, how about a wealth tax on Jeff Bezos, Elon Musk and their like?This is an idea that has obvious attractions. As Joe Biden has pointed out, US billionaires make their money in ways that are often taxed at lower rates than the ordinary wage income of American workers. Overwhelmingly, their wealth comes from the rising value of their assets, and they use tax loopholes and legal accounting moves to minimise the tax they pay. Wealthy Americans pay an average tax rate on their incomes of just 8%. Biden thinks they should be paying a minimum of 25%.Larry Elliott is the Guardian's economics editor Continue reading...

UK constrained by high interest rates, price rises and staff shortages but thinktank offers optimistic outlook for global economyThe UK will be the worst-performing economy in the G7 next year, according to the Organisation for Economic Cooperation and Development, as high interest rates and the lingering effects of last year's surge in inflation drag on growth.In a downbeat assessment, the Paris-based thinktank also downgraded its forecast for UK growth this year to 0.4% from a November forecast of 0.7%. Continue reading...

Big economies such as the US must change fiscal policy as the realities of debt and inflation biteFor more than a decade, numerous economists - primarily but not exclusively on the left - have argued that the potential benefits of using debt to finance government spending far outweigh any associated costs. The notion that advanced economies could suffer from debt overhang was widely dismissed, and dissenting voices were often ridiculed. Even the International Monetary Fund, traditionally a stalwart advocate of fiscal prudence, began to support high levels of debt-financed stimulus.The tide has turned over the past two years, as this type of magical thinking collided with the harsh realities of high inflation and the return to normal long-term real interest rates. A recent reassessment by three senior IMF economists underscores this remarkable shift. The authors project that the advanced economies' average debt-to-income ratio will rise to 120% of GDP by 2028, owing to their declining long-term growth prospects. They also note that with elevated borrowing costs becoming the new normal", developed countries must gradually and credibly rebuild fiscal buffers and ensure the sustainability of their sovereign debt". Continue reading...