Experts fear rising interest rates will cause UK recession, as two UK mobile networks are to merge

Chancellor gives unstinting support to Bank of England as households brace for borrowing costs to rise againJeremy Hunt has said the UK has “no alternative” but to raise interest rates to bring down inflation, as households brace for the Bank of England to increase borrowing costs further next week.The chancellor said the government would be “unstinting in its support” for the central bank to “do what it takes” to squeeze high inflation out of the system amid the cost of living crisis. Continue reading...

GDP rose by 0.2% in April, with rising car sales and reduced impact of strikes also playing a part

Stronger than expected job and pay data makes interest rate rise more likely, driving up two-year bond yields

The Reserve Bank has raised interest rates for the 12th time in 13 months, with governor Philip Lowe warning that rates will keep rising if necessary, despite ‘significant financial pressure’. This plan has come under fire, with treasurer Jim Chalmers saying the bank’s decision was ‘difficult to understand and difficult to cop’, and Commonwealth Bank economists predicting that Australia could slide into a recession this year.Economics correspondent Peter Hannam explains why interest rates continue to rise and columnist Greg Jericho looks at whether the central bank is killing the economy

Bank of England had been looking for signs of labour market softening so it could take foot off brake

UN figures show value of British goods and services exports rose by 6% between 2012 and 2021, compared with 29.1% for EUBritain has endured the worst exports record of any member of the G7 besides Japan over the last decade, according to a new analysis that will raise pressure on the government to reconsider its post-Brexit trade deal with the EU.As most of the world’s other major seven economies have rebounded from the pandemic, export growth has remained sluggish in the UK at a time when businesses trading with the EU faced extra red tape and costs as a result of the country leaving the bloc. Continue reading...

Breaking Bank of England in 1992 arguably set off wave of Euroscepticism that would engulf British politicsPhilanthropist. Intellectual. Trenchant opponent of totalitarianism. George Soros is all of these things. At 92, he has not lost his power to make headlines, as shown by his decision to hand control of his multibillion-dollar Open Society Foundations to his son Alex, going back on a vow that it would not go to one of his children.It has been a long time since Soros was an active investor, and he has been focused on how to spend the fortune he amassed on his main areas of interest – building democracies and supporting human rights. Continue reading...

Bank of England policymaker Jonathan Haskel says interest rates may need to rise higher, as mortgage providers raise rates or withdraw deals

Jonathan Haskel suggests surging borrowing costs for households is a price worth paying to tackle inflationThe Bank of England may need to increase interest rates further to tackle inflation, despite mounting pressure on households from the rising cost of borrowing, senior Threadneedle Street policymakers have said.Jonathan Haskel, an external member of the rate-setting monetary policy committee (MPC), said the central bank could not rule out more hikes given concerns about stubbornly high rates of inflation. Continue reading...

Move follows decision by HSBC and applies to brokers and online applications as lenders hike fixed ratesSantander has become the latest major bank to temporarily pull its mortgage deals for new borrowers from sale, amid a fresh warning that further interest rate hikes may be needed to tackle inflation.Days after HSBC temporarily pulled down the shutters, Santander said it would stop accepting new applications for its “new business” residential and buy-to-let fixed and tracker rates at 7.30pm on Monday, with deals not becoming available again until Wednesday 14 June. Continue reading...

Households and firms can expect more financial pain despite Britain dodging technical recession, says KPMGBritain will be left with deep scars from the pandemic despite narrowly escaping a second recession within three years and growing signs of an economic pick up, according to new forecasts.A new report by the accountancy firm KPMG has found that the economy has enjoyed a better start to the year than it had thought, and is now expected to grow by 0.3% this year, compared with its previous prediction of an uplift of just 0.1%. Continue reading...

Australia’s big supermarkets have increased profit margins throughout the pandemic, and some critics have accused them of ‘excessive pricing’. In response, Woolworths and Coles argue their promotional items show they are protecting customers from some of the price hikes – but are they actually a good deal?

Scaling back of green prosperity plan reflects a possibly costly desire to project fiscal stabilityDread of the financial markets is part of the Labour party’s DNA. This primal fear has been passed down the generations. Ramsay MacDonald, Clement Attlee, Harold Wilson and James Callaghan were all battle-scarred from their vain attempts to defend the pound.Even though the signs point to a big Labour victory at the next election, the mood at the top of the party remains cautious. For months, Rachel Reeves has been on a charm offensive in the City, sending out a message to the bond dealers and currency traders that she will take no risks with the public finances. Continue reading...

Research reveals the extent to which our earnings and values are determined by where we are bornWhere you are born matters a lot. There’s the accent, of course, but I mean in rather less superficial ways. It’s the breadth of those impacts that stands out in a new study from London School of Economics researchers, which shows how the economic circumstances of where and when we were born shape far more than our economic outcomes – moulding everything from our cultural outlooks to voting patterns.The authors join up data tracking British individuals’ attitudes and earnings from 1991 to 2008 with details of the unemployment level in their place of birth – a key measure of economic insecurity. Continue reading...

Keir Starmer and Rachel Reeves are cautious about spending plans. Rejoining the EU would create the prosperity to fund them‘Now the very bounds of Britain are laid bare, and wonder grows where knowledge fails.” (“Nunc terminus Britanniae patet, atque omne ignotum pro magnifico est.”) Tacitus was writing of the Roman invasion of this country 2,000 years ago. Unlike Brexit and post-2010 austerity, that invasion was not an act of self-harm but inflicted from without.All these years later, the bounds of Britain are most certainly being laid bare. In his latest Inside-Out political newsletter, the former Financial Times commentator Philip Stephens makes no bones about it: “Britain is trapped in a spiral of decline. The economy is locked into low growth and high inflation. The public realm is in an advanced state of breakdown. And the nation is looking on incredulously as the Tories prepare to fight each other over the spoils of opposition.” Continue reading...

Opposition finds fallout of Liz Truss mini-budget has raised average mortgage interest payments by £150 a week in two yearsHomeowners are being hit with a “Tory mortgage penalty” of £7,000 a year with interest rates triple what they were two years ago, according to Labour.Pat McFadden, shadow chief secretary to the Treasury, blamed what he called the “reckless economic gamble” taken by the Conservatives during September’s mini-budget when Liz Truss was prime minister. Continue reading...

HSBC temporarily removes mortgage products for new customers, as borrowers face higher rates

Finance minister reaches deal with 75 manufacturers after signs of falling prices for raw materialsBig food manufacturers in France have pledged to lower prices on hundreds of products next month after pressure from the government.The French finance minister, Bruno Le Maire, said he had reached a deal with 75 manufacturers after signs that the prices being paid by the industry for raw materials had been falling. Continue reading...

This is not a good sign Continue reading...

MPs question why some savers are receiving only 0.25% despite 12 consecutive Bank of England interest rate rises

GDP shrank 0.1% in first quarter of 2023 and final three months of 2022 after revisions to earlier estimates

Her hit book Doughnut Economics laid out a path to a greener, more equal society. But can she turn her ideas into meaningful change?Consider the electric car. Sleek and nearly silent, it is a good example of how far the world has progressed in fighting the climate crisis. Its carbon footprint is around three times smaller than its petrol equivalent, and unlike a regular car, it emits none of the greenhouse gases that warm the planet or noxious fumes that pollute the air. That’s the good news. Then consider that the battery of an electric car uses 8kg of lithium, likely extracted from briny pools on South America’s salt flats, a process that has been blamed for shrinking pasturelands and causing desertification.The 14kg of cobalt that prevent the car’s battery from overheating have probably come from the Democratic Republic of the Congo, where cobalt mines have contaminated water supplies and soil. As the demand for electric vehicles grows, the mining and refining of their components will intensify, further damaging natural ecosystems. By 2040, according to the International Energy Agency, the global demand for lithium will have increased more than fortyfold. Continue reading...

Chancellor responds to news UK likely to avoid recession but will have one of highest inflation rates among G20

British businesses have given the CBI a vote of confidence as the lobby group takes steps to reform itself

Combined impact of Covid crisis, Ukraine war and tough measures by central banks taking heavy tollThe world’s poorest countries are the biggest losers from a global economy failing to cope with the combined impact of the Covid pandemic, Russia’s invasion of Ukraine and the tough anti-inflationary measures taken by central banks, the World Bank has said.In its half-yearly update, the Washington-based body said the international community was well off course to meet the UN’s 2030 anti-poverty development goals and warned of the risk of a fresh debt crisis for the most vulnerable countries. Continue reading...

Work on residential building sites slips in May to weakest level since 2009

Consumers increasingly claim that manufacturers are reducing the size of products, Barclays research findsHard-pressed consumers feel they are becoming the victims of food industry “shrinkflation” amid signs the UK’s persistent cost of living crisis is making households more alert to the need to get value for money.With food prices up by almost 20% in the past year, the latest snapshot of consumer activity from Barclays found households were concentrating spending on essentials and increasingly concerned that manufacturers were reducing the size of products such as chocolate bars and packets of crisps. Continue reading...

Mortgage market turmoil prompts record numbers of people to take out loans of more than 35 yearsHundreds more home loan deals have been pulled by banks and building societies since the end of last week while rates on new fixed mortgage deals are continuing to ratchet upwards, the latest data reveals.The continuing turmoil in the mortgage market is also prompting record numbers of people to take out loans of more than 35 years in an attempt to make their monthly payments more affordable. Continue reading...

Rolling coverage of the latest economic financial news, as Brent crude hits $78/barrel and new car market records longest period of growth since 2015

The Business Council is set up by British Chambers of Commerce backed by big companiesA new business lobby group backed by big companies including BP and Drax has been launched, a day before a key vote that will determine the future of the embattled Confederation of British Industry.The Business Council, launched by the British Chambers of Commerce (BCC), aims to bring together business leaders “who are looking for a different kind of representation”. Continue reading...

It’s reasonable to expect a fall in nominal house prices of at least 10%. That’s a chunky fall – and a welcome oneApril is supposed to herald the start of a British ritual: the house-buying season. Traditionally, it is the time when demand for homes picks up and the property supplements in the weekend papers are full of suggestions for sellers bidding to attract the interest of buyers.But not this year. According to the latest bulletin from the Bank of England, repayments on existing mortgages in April were £1.4bn higher than new loans. This is unusual. Apart from during lockdown, it was the lowest figure since records began in 1993. The number of new mortgage approvals – loans agreed but not yet advanced – fell in April and were well below the average in the five years leading up to the pandemic. Continue reading...

The president has outmanoeuvred his opponents again and shown that the right, both in the US and the UK, has no riposte to his brand of economicsHe stumbles when coming down the stairs of Air Force One; he trips over a sandbag on stage to fall flat on his face when handing out diplomas at the US air force academy; he muddles his words with alarming regularity. It is easy to write off President Joe Biden as a senile, 80-year-old duffer. Yet he is already being regarded by many Democrats, and some Republicans, as significant a Democratic president as Franklin Roosevelt or Lyndon Johnson. He is dramatically changing the face of the US around Democratic priorities – reindustrialisation to support blue-collar jobs and wages, wholeheartedly fighting climate change, investing massively in science and education, doing more for the poorest and, not least, rejuvenating the US’s decaying public infrastructure.But, unlike his famous predecessors, he has never had their big majorities in Congress, and after November’s midterm elections he does not even control the House of Representatives. He has had to rely on guile, sheer political craft and reading the Washington runes better than any alive. For the last few months we were being warned of financial Armageddon, as an implacable Republican party forced the US to default on its debts, only to be avoided if the administration agreed to its demands for swingeing public spending cuts to avoid going through an artificial debt ceiling limit. Tomorrow was to be the witching day when default occurred and a financial crisis engulfed the world. Instead, last week the wily Biden again outfoxed his opponents, and struck a deal massively weighted in his favour that was voted for by overwhelming majorities. It was an extraordinary victory and, when invited to claim it as such, he replied: “You think that’s going to help me get it passed?” First rule in Washington politics, from which the affable Biden has never deviated: always allow the defeated to save face because you’re soon going to have to cut another deal with them. Continue reading...

Central banks seem blind to one of the real causes of inflation: profiteering under cover of Covid and the Ukraine warGreedflation will probably prove to be a brief moment in history – two years, possibly three, when corporations jacked up prices above and beyond the extra costs they faced, while most people were more concerned with the pandemic and later the Ukraine war.Brief it may be, but history won’t be kind if we ignore the importance of greedflation, as most economists and policymakers have done so far. Continue reading...

Decades of attempts to overcome economic blight in the region have failed. Now some say a fresh approach is neededDriving up the bigger of the two Rhondda valleys, it is hard to believe that not so long ago it was part of one of the biggest coal-producing areas in the world. The terrace houses built for the men who worked the pits are still there, but of the mines themselves nothing remains. Nature has reclaimed the spoil tips. The scars of industrialisation are hard to spot.But appearances can be deceptive. The human scarring from deindustrialisation has been deep and long-lasting. The Welsh valleys stretching north from Cardiff have low levels of employment and high levels of deprivation. Income per head is among the lowest in the UK and low pay is endemic. Continue reading...

US economy added more jobs than forecast last month, with March and April’s data revised higher too, but unemployment rate has jumped to 3.7%

US adds 339,000 jobs in May, surpassing forecasts, as unemployment rate increases slightly to 3.7%High interest rates, a recent banking crisis and Washington’s fight over the debt ceiling may have shaken the US economy recently, but the US jobs market continues to show signs of strength.The US Bureau of Labor Statistics (BLS) reported 339,000 jobs were added in May, surpassing forecasts that predicted the increase would be approximately 190,000 jobs and a sign of continued growth from the jobs market despite the Federal Reserve’s continuing efforts to cool the economy. Growth in the labor market has fluctuated over the last few months, dipping down to 165,000 jobs in March and coming back up to 253,000 jobs in April. The number of jobs added is still down compared with this time last year, when 390,000 jobs were added to the economy. Continue reading...

Some payday loans have interest rates as high as 664% – but now Minnesota will cap them at 36%, in line with some other statesMeka Armstrong of Detroit, Michigan, has struggled in a cycle of debt from payday loans for years. She first took out a payday loan in 2010 to cover the costs of medication she needs as she is disabled and lives with lupus.“Worst decision I ever made,” said Armstrong. “The interest rate was 49% and I thought I would get my medications and pay the money back, but when I paid the money back, it left me with nothing. That’s how they get you. I, unfortunately, started the payday nightmare, and you can’t get out of the loop.” Continue reading...

Eurozone inflation eased more than expected last month, as former US Treasury secretary Larry Summers warns Brexit helped to drive up UK inflation

G7 sought deterrence without escalating new cold war but Beijing responded with rageAfter the May G7 summit in Hiroshima, the US president, Joe Biden, claimed that he expected a “thaw” in relations with China. Yet, despite some recent official bilateral meetings – with the US secretary of the Treasury, Janet Yellen, expressing hopes for a visit to China soon – relations remain icy.In fact, far from thawing, the new cold war is getting colder, and the G7 summit itself magnified Chinese concerns about the US pursuing a strategy of “comprehensive containment, encirclement and suppression”. Unlike previous gatherings, when G7 leaders offered mostly talk and little action, this summit turned out to be one of the most important in the group’s history. The US, Japan, Europe and their friends and allies made it clearer than ever that they intended to join forces to counter China. Continue reading...

You want us to do what? Continue reading...

With young people staying at home longer than ever, it’s no surprise the Reserve Bank governor’s comments went down like a lead balloon

When the economy doesn’t work in the way that theory suggests, it’s time to junk the theoryThe whisper that the government was considering price caps on food, now the biggest driver of inflation, has produced the inevitable backlash. Out scuttled mini-me Thatcherites and big business PRs waving shrouds. Ministers admitted only to looking into the idea of “voluntary” controls. But the last 15 years have shown that state intervention is considered economic heresy until it becomes politically necessary.While control of inflation is the job of the Bank of England, the government has made halving inflation this year one of the five pledges on which it wishes to be judged. Since 2008 there has been a turn away from free-market ideology, as it became increasingly clear that the economy was not working in the way textbook models had assumed. This has become obvious in the case of inflation, which mainstream economists mistakenly viewed from the vantage point of the 1970s. Seen from here, rising prices are to do with too much demand in relation to economic capacity on one hand, and too much money chasing too few goods on the other. Continue reading...

Higher borrowing costs and tighter lending will slow global growth sharply this year, Moody’s warns

Moody’s report shows weak growth across G20 as central banks move to reduce persistent high inflationStubbornly high inflation and higher borrowing costs are poised to drive the economies of the UK, Germany and US into recession, the leading rating agency Moody’s has warned.In a downbeat forecast for growth across advanced G20 economies, it said a ramping up of interest rates by central banks on both sides of the Atlantic was expected to weigh on economic growth this year. Continue reading...

Move called ‘historic’ but agreement with Australia forecast to raise Britain’s GDP by only 0.08% by 2035The UK’s post-Brexit trade deals with Australia and New Zealand have come into force, a moment lauded by the government as “historic” despite critics arguing they give away “far too much for far too little”.The trade agreements – the first of those negotiated after Britain’s EU exit to enter into force – come after George Eustice, who was the environment secretary when the UK-Australia trade pact was struck in December 2021, admitted it was “not actually a very good deal” for Britain. Continue reading...

Number of residential deals down by almost 7% in a week, in echo of crisis that followed Liz Truss mini-budgetUK banks and building societies have pulled almost 800 residential and buy-to-let mortgage deals in the past few days amid growing concerns over future interest rate rises.In an echo of the crisis that engulfed the sector last autumn after the mini-budget that brought down Liz Truss, the number of residential mortgage deals has fallen by almost 7% in a week, according to figures from the financial data provider Moneyfacts. Continue reading...

British Retail Consortium says rate fell from 15.7% to 15.4% even as rise in overall shop price growth hits fresh highFood inflation in the UK fell in May, lifting hopes that the rapid increase in grocery price growth may have reached its peak after keeping the broader consumer prices index painfully high so far this year.After more than a year of sharp increases in the price of food, the British Retail Consortium (BRC) said annual food inflation eased this month from 15.7% to 15.4%, even as the overall rise in shop prices hits a fresh high. Continue reading...

The AI boom is driving demand for chips from manufacturers like Nvidia, which has seen its share price soarShares in ITV have fallen as much as 1.3% this morning to their lowest level in five months, as the broadcaster deals with the fallout of a scandal involving one of its former stars.The drop comes on the first day of trading since This Morning star Phillip Schofield quit, having admitted he lied to the broadcaster over a relationship with a younger worker. Continue reading...

Some instant access accounts as low as 0.1% despite Bank of England’s 4.5% base interest rateUK banks are paying savers “measly” rates on their cash even as the Bank of England has taken its base interest rate to the highest level in more than a decade, according to a study from the consumer group Which?.Consumers face rates as low as 0.1% for some instant access savings accounts, Which? found. Continue reading...