Economics | The Guardian

Entertainment launders reputations. No wonder washed-up politicians are so keen to invest in this great speech bubbleFew things became Alan Clark less than retirement. My mind races," the Thatcher-era Tory junior minister raged into his diaries. I am hungry for news and gossip, resentful at John Major ... how could they? Although, of course, the cruelty of politics is its attraction."If only he'd hung on for the arrival of podcasts. Today, Clark would be a cert to host his own politics one, sweeping the crumbs from Westminster tablecloths into a regular 50 minutes of audio content: reminiscence, gossip and crisp, chilled cruelty - Who's down? Who's out? - all generously sponsored by a manufacturer of probiotic yoghurt.Aditya Chakrabortty is a Guardian columnist Continue reading...

JP Morgan says risk of hard landing' for economy heightened, with higher borrowing costs hitting businessThe Bank of England may need to push interest rates to as high as 7% to tackle stubbornly high inflation, economists have warned, amid fears the soaring cost of borrowing could drive the economy into recession.With households under growing pressure from rising mortgage costs, the US investment bank JP Morgan said there was a risk that persistent inflationary pressures could lead the central bank to raise interest rates by more than expected. Continue reading...

The tipping point for the economy could come if fixed-rate mortgages rise above 7%All things considered, Britain's housing market has held up pretty well so far in the face of a relentless rise in borrowing costs that has seen five-year fixed rate mortgages climb above 6%. House prices, according to the Nationwide Building Society, are down just 3.5% on a year ago and rose slightly in June. The Bank of England reported a small rise in mortgage approvals in May.The key words, though, are so far". Just because there has yet to be a housing crash despite 13 consecutive increases in interest rates from Threadneedle Street's monetary policy committee doesn't mean there won't be one. There is still the chance of a soft landing but the risks of a hard landing are rising by the day. Continue reading...

Inflation remains too high globally - and Australia's may still be out of whack' by the time the board next meets in August

Mortgage rates hit highest since last autumn, adding to squeeze on borrowers

There appears to be no relief in sight for homeowners or renters - but there are things that can be doneThere will be no government handouts for the hundreds of thousands of homeowners facing crippling increases in monthly mortgage repayments after the Bank of England's decision to raise rates to 5%. To do so would defeat the object of the interest rate rise - to cool down the economy - and prolong the inflation crisis. Further rate rises look likely as inflation proves more sticky in the UK than many other high-income economies.The government is instead opting to get the UK's major banks to agree to a voluntary mortgage charter". This involves offering forms of temporary relief such as short-term switches to interest-only repayments, as well as extending the period between missed payments and forcible home repossession. Labour has proposed a similar response. This is sensible. Banks should be well placed to absorb some reductions in returns, being better capitalised and enjoying high returns on their lending on the back of recent interest rate rises. But if rates stay higher for longer, additional assistance may be needed to avoid repossessions.Josh Ryan-Collins is associate professor in economics and finance at the UCL Institute for Innovation and Public Purpose Continue reading...

Government pledges to expose rip-off' fuel retailers, after inquiry finds declining competition between retailers led to higher prices at the pumpsSpeaking of warning shots... the Treasury Committee has given UK banks another blast for not increasing savings rates faster.MPs on the Treasury Committee have written to the bosses of Britain's biggest banks, asking if they believe their savings rates provide fair value' to customers and whether customer inertia is being exploited.With interest rates on the rise and our constituents feeling squeezed by rising prices, it is only right that the UK's biggest banks step up their measly easy access savings rates. The time for action is now.The biggest high street banks have a particularly important role to play in encouraging saving. Currently, they are failing on that social duty. We look forward to receiving answers to these important questions in due course." Continue reading...

With the best-buy tables changing almost by the hour, what's the best strategy for maximising returns and not missing out?Rising interest rates mean savers are being offered the best returns in years, with some of the latest deals at more than 6%. After a flurry of activity last week, Anna Bowes, co-founder of website Savings Champion, says fixed-rate deals are more competitive than ever before.There's a group of providers that keep leapfrogging each other in the best-buy tables - it's only by small amounts, but it's pushing up rates every time," she says. One account that launched and looked great was pushed out of the top five an hour later." Continue reading...

Her hit book Doughnut Economics laid out a path to a greener, more equal society. But can she turn her ideas into meaningful change? Continue reading...

Caution needed rather than panic measures over short-term risks after credibility of government and Bank of England hitFor more than a year Britain has been trapped with the highest inflation rate in four decades. Rather than making serious inroads to shift this uncomfortable fact, the past month's economic developments have turned the country to panic.The view in the City is the Bank of England has lost control. After a parade of bad news, leaving it backed into a corner, the central bank's latest rate increase was as much a plea to financial markets to be taken seriously again as it was an inflation-busting tactic. Continue reading...

The prime minister is finding it devilishly difficult to keep his promises You can order your own copy of this cartoon Continue reading...

According to some theorists, the UK will have to keep prices flat for the next seven years to make up for the last three. Really?What if the UK has used up all its inflation allowance for the whole decade?This question assumes there is an optimum level of inflation - a 2% average - and that the UK has already used its entire allocation for the 2020s. Continue reading...

Many of those who have left the workplace are being forced to return by the cost of living crisis to bolster their financesDee, 67, who lives in Accrington in Lancashire, left school at 14. She worked in factories, hairdressing shops and bars, and did secretarial temp work all over the country before she took a job at HM Revenue and Customs, where she worked full-time for 23 years.Last year, in May, she began her retirement, but after only a few weeks she realised that she could not afford it because of the rising cost of living. I had two months off, then I had to return to work," she says. I rent my home and I can survive on my state pension of around 800 a month and two small private pensions, but I cannot live. My rent and household bills alone come to just under 700." Continue reading...

As the cost of living crisis bites, consumers are asking how so many businesses have maintained or raised their profits Haggle, slash and switch: five ways to cut household bills as UK prices soarDavid Cameron was famously asked the price of bread a decade ago and struggled to answer, saying instead he used an electric breadmaker. The answer was around 47p.Then, the Tories were struggling to deal with a cost of living crisis and were accused of being out of touch. Now, here we are again a decade later, with the prime minister Rishi Sunak and his chancellor Jeremy Hunt being accused of having no clue. Only now an average white loaf is 1.37 - and this time it's not just politicians that are under pressure to do something about it. Continue reading...

Joe Biden's team focuses on voters' dim perception of president's handling of economy despite signs of positive performanceAs Joe Biden launches his 2024 re-election campaign, the White House is hoping to revamp the messaging on the president's economic performance with a series of speeches, memos and the term Bidenomics".On Wednesday, Biden delivered what was billed as a major speech focused on the economy as he told an audience in Chicago that the Republican policy of trickle-down economics" had failed America". In its place, Biden vowed to create policies that would prioritize growing the middle class, touted post-pandemic economic recovery and announced Bidenomics is working" - one of 15 times he used the word over the course of his speech. Continue reading...

Eurozone price pressures have eased, although core inflation has risen, as economists warn UK recession risk has not vanished

Economists put reason for divergence down to Brexit and Britain's energy price guarantee

Andrew Bailey says financial markets expect more rate rises amid continuing high inflationThe Bank of England governor, Andrew Bailey, has hinted that interest rates may stay high for longer than expected amid stubbornly high inflation.Speaking at the annual conference of the European Central Bank, Bailey said it was clear financial markets expected several more interest rate rises. Continue reading...

Measures are aimed at preventing companies using rampant inflation to hike prices during cost of living crisisBritain's watchdogs have agreed to a suite of measures aimed at protecting consumers from being ripped off by companies during the cost of living crisis, after a meeting with the chancellor.Jeremy Hunt said the action plan" agreed to support consumers would ensure they are treated fairly" amid concerns over greedflation - companies using rampant inflation as a cover to hike prices and boost profit margins. Continue reading...

Rolling coverage of the latest economic and financial news, as government begins drawing up contingency plans for the collapse of Thames Water

For the first time since Covid, businesses are most to blame for the UK's high inflation rates. But ministers are doing little about itJohn Maynard Keynes wrote, when considering the great inflationary episode of the first world war, that no one benefited except the profiteer. The seeds of much subsequent trouble were sown. And we ended up with a national debt vastly greater in terms of money than was necessary and very ill distributed through the community." That is where Britain finds itself heading. Keynes's penetrating analysis is now ringing through Whitehall and beyond.When Jeremy Hunt sits down with industry regulators on Wednesday, he will need more than soundbites to make companies stop fleecing their customers. Mobile and broadband companies have just pushed through the biggest price rises for 30 years. And when the Organisation for Economic Co-operation and Development looked this month at whether workers, businesses or governments had contributed most to inflation, the data showed that, for the first time since the pandemic, businesses were most to blame in the UK. Continue reading...

UK economy became reliant on cheap money due to the Bank's actions, warns former permanent secretary to the TreasuryThe Bank of England's quantitative easing money-printing programme enabled high inflation to take root in Britain, while creating windfall gains" for the rich, a former Treasury mandarin has warned.Nick Macpherson, who was permanent secretary to the Treasury under the last Labour government and during David Cameron's premiership, said the central bank's 895bn bond-buying stimulus programme had gone too far" and made the inflation shock hitting Britain worse. Continue reading...

Thames Water has announced that Sarah Bentley has resigned as chief executive of the company.

Unit owners particularly vulnerable as profitable national housing sales sank to 92.3% in the three months to March 2023, according to CoreLogic data

After asking borrowers to hold their nerve, the prime minister now seems to be preparing to further squeeze public sector workersFresh from urging mortgage borrowers to hold their nerve" in the face of dramatic increases in repayments, Rishi Sunak now appears to be preparing to squeeze public sector workers in his battle against inflation.Asked this week whether he would implement the recommendations of independent pay review bodies for staff including teaching and doctors - which are believed to be calling for increases of between 6% and 6.5% - he said staff need to recognise the economic context we are in". Continue reading...

Exclusive: Ofcom is facing calls to intervene after companies pushed through prices rises of up to 17% this year

EE customer living on boat to escape surging rents is astonished' by jump in broadband bill

Christine Lagarde says without a shift in corporate behaviour, interest rates will need to stay higher for longerCorporate profits were the biggest factor driving up prices last year and will be again in 2023 unless businesses are forced to absorb rising wage bills, the head of the European Central Bank has said.Outlining how the ECB plans to tackle inflation across the 20-member eurozone, Christine Lagarde said she was concerned that firms would again test" consumers' appetite for paying higher prices despite a steep decline in most business costs in recent months. Continue reading...

While inflation may have peaked in 2022, households and firms are getting more used to it, making it harder to dislodge

British Retail Consortium says figure eased to 8.4% in June from 9% in MayBritain's biggest retailers have said shop price inflation is easing ahead of a crunch meeting with MPs on Tuesday over the soaring cost of groceries, but warned food prices were continuing to rise at near record rates.The British Retail Consortium (BRC) said annual inflation in overall shop prices eased to 8.4% in June, down from 9% in May, as retailers cut the price of many staples including milk, cheese and eggs. Clothing and electrical goods prices also fell ahead of the summer holidays. Continue reading...

Home secretary says benefits of deterring irregular immigration should also be considered, as economic impact assessment publishedThis is what Rishi Sunak said in his clip for broadcasters in response to claims that today's King's Fund report (see 9.28am) showed the NHS was going in the wrong direction" under the Conservatives. He replied:One of the my five priorities is to count NHS waiting lists. That's why we've put record sums into the NHS since I became prime minister, with record numbers of doctors, nurses, and new ways of doing things which are starting to make a difference.But we also need to make the decisions that will modernise the NHS for the long term. Today's example, rolling out lung cancer screening, will really help improve survival rates for lung cancer, something where we are behind other countries, but today's announcement will help to fix that. Continue reading...

Readers offer solutions to rising interest rates and mortgage costsHow very apt to compare the rises in interest rates on mortgages with other European countries (Report, 20 June). In any other aspect of life, taking on a loan when you do not know what the future repayments will be would be very bad financial practice. Yet when homebuyers take on what is likely to be by far their biggest loan, the best they can hope for is a fixed term of two or, at best, five years - thereafter they are at the mercy of the financial markets and government policy. Why? The mortgage company does not need to raise more cash for their loan, so raising the interest rate during the term of a mortgage seems to be out-and-out profiteering.A fixed-term, 30-year mortgage seems to be far more sensible, and gives homeowners confidence and security. When will we start adopting a system that is fair to all?

Associated British Foods says group sales rose by 16% with steeper prices helping to drive Primark's growth

Traders will not be able to absorb estimated 10m extra cost on goods entering from EU, warns Fresh Produce ConsortiumThe UK's post-Brexit border strategy risks further pushing up food prices, according representatives of Britain's fresh produce industry.Traders in the food supply chain are warning they will not be able to absorb the extra cost of charges levied for import checks on goods entering the country from the EU and the rest of the world, due to be introduced in the new year. Continue reading...

Chancellor to meet watchdogs to discuss claims that company profiteering is stoking inflation

Bank of International Settlements warns that economies, such as in the UK, need policies to cool price growthGovernments must raise taxes or cut public spending after central banks kept interest rates too low for too long in the face of higher inflation, according to the Bank of International Settlements.Closing the gap between government income and expenditure would calm inflation", according to the annual report from the Basel-based organisation, which advises 63 central banks covering 95% of global economic output. Continue reading...

Policymakers are too quick to slow the economy and risk recession when the solution is to rejoin the EUAsked some time before the latest increase in Bank rate whether he was comfortable with such a prospect, even at the risk of precipitating a recession, Jeremy Hunt, the chancellor, replied yes".During the 1990-92 recession, John Major, as chancellor, declared: If it isn't hurting it isn't working." But that was when the recession was well under way. And when he became prime minister, his chancellor, Norman Lamont, said: Rising unemployment and the recession have been the price that we have had to pay to get inflation down. That price is well worth paying." (This is often misquoted as worth paying", but accuracy matters.) Continue reading...

The best paid have had the highest wage hikes, but the majority of workers have seen their salary growth fall, according to ONS dataPay rises for the top 10% of UK earners, including City bosses, have clearly outstripped those for the rest of the workforce and been prime drivers of recent inflation and soaring interest rates, according to new analysis of official figures.After a week that saw interest rates rise for the 13th consecutive time, by 0.5 percentage points, to their highest level level since 2008, the Bank of England's governor, Andrew Bailey, angered union leaders by appearing to blame low and middle earners for wage demands that had fuelled the crisis. Continue reading...

Beware the jaws that bite, prime minister! You can order your own copy of this cartoon Continue reading...

Options for homeowners and first-time buyers as they face maelstrom in market

Delay is under intense scrutiny from City watchdog - but it may not just be simple profiteeringActivists, campaigners and MPs are growing increasingly concerned that savings rates are failing to keep pace with the rapid rise in borrowing costs, putting the behaviour of the UK's biggest banks in the spotlight.While worries are mounting about how mortgage holders will cope with higher interest rates, less focus has been put on savers. This group is often frustrated when mortgage rates seem to rise lock-step with the Bank of England's base rate, while savings rates seem to be lower and slower to respond. Continue reading...

Measure among three to emerge from meeting to help struggling households after sharp rate hike

PM says he still backs Andrew Bailey despite criticism he has failed to take the right measures to curb inflationThe Bank of England governor, Andrew Bailey, has come under fire for failing to predict prices would would increase by so much and for not acting sooner to tame inflation. Although Russia's invasion of Ukraine fuelled price rises in other parts of the world as energy costs soared, inflation has since slowed in many parts of Europe and the US. In the UK, however, it has remained stubbornly high.The result of persistently high inflation is that the Bank has rapidly raised interest rates, from 0.1% in December 2021 to 5% on Thursday, causing panic among millions of homeowners facing the prospect of sharply higher borrowing costs. Continue reading...

From Tony Blair to George Osborne, our rulers painted false pictures of success while real wealth and wages withered awayYou know the central conceit of Oscar Wilde's The Picture of Dorian Gray, of course you do. A lad of sun-kissed beauty is presented with a stunning likeness of himself. Disturbed at the notion that he will grow old while the painting doesn't, he locks it away - where it is the portrait that ages and uglifies while Dorian stays boyish and beautiful. But perhaps you've forgotten what happens next.The story has come to my mind many times, as the foulness of British politics becomes ever harder to ignore. Genteel liberals wonder how their land of cricket whites and orderly queues could be ruled by a grasping liar such as Boris Johnson and I hear a whisper on the wind: Dorian Gray. The New York Times and Der Spiegel report in bewilderment on a country with pockets of deep poverty and unslaked anger, and again rasps that hoarse voice: the horror was hidden here all along.Aditya Chakrabortty is a Guardian columnist Continue reading...

Bank raises base rate to 5% and is predicted to go to 6% as pressure grows on government to interveneRishi Sunak's pledge to ease the cost of living crisis is in tatters after the Bank of England was forced to raise interest rates to 5% in an inflation-busting move that risks driving the economy into recession.With the prime minister under fire over the soaring cost of borrowing, the central bank pushed through a half-point hike, deploying what economists described as shock and awe" tactics. Continue reading...

Move at Paris summit on global finance will only apply to repayments on new loansPoor countries will be able to pause their debt repayments if hit by climate disaster, under plans announced by the World Bank at the finance summit in Paris.The international development organisation said it would insert new clauses in any agreements with developing countries, allowing them to suspend debt payments in the case of extreme weather events, starting with some of the poorest and most vulnerable nations. Continue reading...

Rates will remain at level until summer 2024 after Bank of England hikes benchmark rate by half a percentage pointThe financial markets are predicting UK interest rates will hit 6% by the end of the year, and remain at that level until next summer, after the Bank of England hiked its benchmark rate by half a percentage point.The financial markets were volatile as economists warned that the Bank's efforts to cool inflation by lifting its key lending rate to 5% on Thursday could trigger a recession. Continue reading...

Prime minister says he knows people will be anxious about rate rise but it is going to be OK'. This live blog is closed

Rolling coverage as the Bank of England lifts UK interest rates to a 15-year high, as it contnues to fight inflation

Research allays fears that rapid scaling back of production would hit people's savings and pensions hardA rapid reduction in fossil fuels, essential to avoid devastating climate breakdown, would have minimal financial impact on the vast majority of people, new research has shown.Urgently cutting back on fossil fuel production is essential to avoid the worst impacts of climate breakdown and the economic and social turmoil that would ensue. However, some opponents of climate action claim it is too expensive. They argue that rapidly scaling back fossil fuel production would leave billions of pounds of stranded assets", leading to an economic slump that would impoverish the public through a fall in the value of savings and pension funds. Continue reading...