City economists predict annual rate will fall from 8.7% recorded in April and May but will still be higher than in eurozone

Rishi Sunak used just-go-for-it route in Covid crisis but Treasury and Bank of England now play with straightest of batsThe England cricket team are winning friends and admirers after adopting a style of play known as Bazball. Named after the side's coach, Brendon (Baz) McCullum, it is an aggressive, carefree approach to the game in which risks are taken with bat and ball. It doesn't always come off but, win or lose, it has made the England team a lot more fun to watch.Rishi Sunak is a cricket fan and in his early days as Boris Johnson's chancellor he was a strong advocate of an economic form of Bazball. This was early 2020 and, in truth, the Treasury and the Bank of England had no choice but to throw caution to the wind because a global pandemic was raging. Sunak borrowed more than any other peacetime chancellor so that furloughed workers still received wages. The Bank cut interest rates to a record low of 0.1% and pumped billions of pounds into the economy through its bond-buying programme known as quantitative easing. Continue reading...

This week's CPI figures look set to highlight a trend: that prices in the UK seem to rise faster than they do elsewhereThe UK has a longstanding problem with inflation. Since the 2008 banking crash, bouts of inflation felt across the world have sent prices higher in the UK than its G7 rivals.In July 2009, during the recession that followed the banking crisis, UK inflation was 3.1 points above the G7 average. Two years later, when recovery sent oil prices soaring, it stood about 2% above the G7 average. In March this year, however, it stood a full 3.5 points above the G7 level. Continue reading...

Exclusive: Labour leader urges left to care more about growth' and rules out spending vast sums of money'

The new round of austerity is guided by older voters' insistence on keeping their subsidies and tax breaks - can't they show some generosity?The Tory-voting baby boomer has some tough choices to make over the next year.Fearful that their accumulated wealth is being threatened by one economic shock after another, they could choose to support the government's return to austerity. Or they might consider sharing their lucky gains from the property market and a private occupational pension system that clearly benefits older generations. Continue reading...

Australian Airports Association tells parliamentary inquiry market dominance has allowed the two airlines to jack up profit margins

Strike action involving baggage handlers and check-in staff will inevitably" cause severe delays, disruption and cancellations, Unite union says

ONS finds one in 20 households have run out of food in the past and could not afford moreBritain's cost of living crisis is forcing more people to dip into savings to make ends meet, according to official figures showing renters are at the greatest risk of financial vulnerability.The Office for National Statistics said three in 10 people it surveyed were using savings because of the rising cost of living, an increase from a quarter of adults reporting this in late April. Continue reading...

Firms in Kent uncertain as government's strategy for checks from this autumn remains unclearEvery day, from early morning to late at night, lorries pull up at an inconspicuous-looking warehouse located just off the M20 near Lympne in Kent.Less than half an hour by road from both the Port of Dover and the Eurotunnel terminal at Folkestone, trucks loaded with fresh produce come to a facility run by the logistics company PML to get consignments of goods arriving from overseas inspected, cleared for customs and sent on their way. Continue reading...

Estimated 25 low-income countries spent more than 20% of their revenues on debt servicing last yearAn additional 165 million people have been pushed into extreme poverty in the world's poorest countries after a succession of economic shocks since the Covid pandemic, according to the United Nations.In a report highlighting the human cost of inaction", the UN Development Programme (UNDP) said low-income countries urgently needed breaks from their debt repayments to cushion the blow from soaring borrowing costs. Continue reading...

Prime minister Anthony Albanese says the accomplished economist' with close to four decades of experience at the Reserve Bank of Australia will replace Philip Lowe as the central bank's ninth governor after his seven-year term ends on 17 September. Treasurer Jim Chalmers hails the history-making appointment' and thanks Lowe for his service, saying: Phil Lowe goes with our respect, he goes with our gratitude and he goes with dignity.' The outgoing governor has overseen 12 interest rate rises in the past 14 months aimed at reining in inflation

First-time buyers face high mortgage rates, while soaring rents and bills hinder saving for deposits - no wonder there's a big slowdownInquiries by would-be buyers of homes hit an eight-month low last month, according to the Royal Institution of Chartered Surveyors, which talked about a renewed deterioration in UK home sales". On the same theme, Barratt Developments' trading update on Thursday related a near-halving in reservations from first-time buyers year on year. And the estate agent Winkworth warned this week on profits because of a slump in activity.In other words, the news from the housing market is exactly as you would expect when buyers are adjusting to the new reality of sharply higher mortgage rates. The big slowdown is on, even if Barratt added that demand among existing homeowners was more resilient. A typical two-year fixed deal has risen to 6.66%, a 15-year high on Moneyfacts data. Continue reading...

Rolling coverage of the UK GDP report for May, and the Office for Budget Responsibility's latest report on the public finances

Gloomy report says national debt could exceed 300% of GDP within next 50 years Business live - latest updatesThe UK's public finances are in a very risky period" after a series of major shocks that have driven the nation's borrowing costs to rise at the fastest rate in the G7, the Treasury's tax and spending watchdog has said.The independent Office for Budget Responsibility said national debt could surge to more than 300% of gross domestic product by the 2070s, up from about 100% today, and that the government was not taking measures to make big changes in the short term. Continue reading...

International Energy Agency still expects a record high this year, but for growth to be lower than thoughtGlobal oil demand will reach an all-time high this year, but persistent macroeconomic headwinds" mean it will not grow as quickly as had previously been expected, the International Energy Agency (IEA) has said.The Paris-based global energy watchdog said that demand was expected to rise by 2.2m barrels a day in 2023, leading to an average of 102.1m barrels a day. Continue reading...

Soaring interest rates and end of help-to-buy scheme blamed for driving away first-time buyersBritain's largest housebuilder, Barratt Developments, has suffered a double-digit drop in annual profits after a significant slump in demand, as the surge in interest rates and the end of the help-to-buy scheme drove away first-time buyers.Demand from would-be homeowners fell by 49% in the year to June, which dragged on overall sales and accounted for half of the total decline in its home reservations. Continue reading...

Cycle of interest rate rises are expected to continue after better than forecast economic data

GDP fell month on month after growth of 0.2% in April, reports ONS

UK wages have risen at a faster pace than expected but inflation is still worryingly high. The Conservatives seem to be edging back towards austerity and Labour doesn't want to offer false hope' on the economy. Is the politics of hope dead? The Guardian's John Harris is joined by former Tory minister David Gauke and Guardian columnist Gaby Hinsliff Continue reading...

Survey of estate agents reports growing reluctance among potential homebuyers to make a purchase

Bank of England has warned about potential risks to financial stability for ages. One of theses days, they may matter

Not too early to start chilling the champagne,' says one analyst as traders toast drop in consumer inflationBritain's blue-chip share index has posted its biggest one-day jump of 2023 after US inflation slowed by more than expected last month.The FTSE 100 index gained 133.5 points on Wednesday to 7,416 points, up 1.83%, its best day since November 2022. Continue reading...

Analysts say 17% rise from spring 2022 shows housing market isn't working for anyone'The average cost of renting a room in the UK has risen to more than 700 a month for the first time, according to data from the property website SpareRoom.Experts said the data was proof the housing market isn't working for anyone", and that rising rents meant tenants were stuck in unsuitable homes. Continue reading...

Groups who benefited from strong jobs growth will be the first to lose work come a recessionWhat should we expect to be talking about in this new financial year? It seems likely the debates will be about rising wages, rising unemployment and a recession.To be honest, the first of these is no great prediction. There is always fearmongering from the usual suspects that wages are rising too fast. Continue reading...

The Reserve Bank governor will soon find out if his term has been extended - but economic hints from major banks tell a happier story than expected

Come the general election, the worst of Britain's pain may be over, so Starmer's slow and steady approach is the right oneMortgage rates this week are at their highest level since the global financial crisis 15 years ago. The International Monetary Fund has warned that borrowing costs may need to go higher - and stay there - if the Bank of England is to bring inflation back on target. Pay packets are going up but prices are going up faster. People are getting poorer, not richer.Clearly, this is a problem for a government that can only delay the next general election for at most 18 months. But it is also a cause for concern for Labour, which stands to inherit an economic mess and a ton of political problems, if it can end a run of four election defeats. Continue reading...

Increase was the smallest since March 2021 and down from a four-decade high of 9.1% in June 2022The rising cost of US goods and services slowed to a two-year low in June, a sign that inflation is continuing to ease as the economy responds to the US Federal Reserve's rapid increases in interest rates.The latest consumer price index (CPI) figures, which measure the prices of a basket of goods and services, increased 3% over the last year. This was the smallest increase since March 2021 and down from a four-decade high of 9.1% in June 2022 as pandemic supply chain issues clashed with burgeoning consumer demand. Continue reading...

Banks could weather 125bn hit in economic downturn' despite rising interest rates

Inflation and borrowing costs make it less likely PM will be able to tackle debt or cut taxThe Treasury's tax and spending watchdog is preparing to sound the alarm over the impact of rising interest rates on the public finances, delivering a serious blow to the government's scope for pre-election tax cuts.The independent Office for Budget Responsibility will warn that stubbornly high inflation and soaring borrowing costs are adding to the challenges facing Rishi Sunak, making it less likely that he will meet one of his five key pledges - tackling Britain's public debt. Continue reading...

Chancellor thought to have ruled out providing extra cash if PM decides to accept pay review bodies' recommendationsJeremy Hunt has told ministers there will be no extra money to give millions of public sector workers an average 6% pay rise, potentially leaving departments facing a difficult choice between raising salaries or cutting frontline services.The Guardian understands the chancellor has ruled out providing a further cash injection beyond what is already budgeted if Rishi Sunak decides to implement the recommendations of independent pay review bodies, which are expected as soon as Thursday. Continue reading...

Treasury Committee quiz lenders about mortgage rates, as two-year fixed mortgage rate rises to 6.66%, highest since 2008

Begbies Traynor's profits leap 50% as insolvencies in England and Wales hit a 24-year highBritain's debt-laden zombie" companies are expected to be wiped out by the surge in interest rates, an insolvency specialist has predicted.Begbies Traynor, a business recovery and financial consultancy, has said all of the nation's zombies - companies struggling to service debts that have avoided bankruptcy through cheap borrowing costs - will have failed by the end of next year. Continue reading...

Jeremy Hunt and Bank of England's Andrew Bailey call for wage restraint to help curb inflation

Seizing funds would help finance reconstruction and act as a deterrent, but it could let Putin paint himself as the victimThe debate over using frozen Russian assets to fund Ukraine's reconstruction is coming to a head. The arguments in favor are compelling. The objections are weak. But there could also be unintended consequences.Canada has passed legislation allowing Russian assets to be redeployed on behalf of Ukraine. In the US, four members of Congress have introduced legislation to repurpose sovereign Russian assets for Ukraine. And EU leaders considered the issue at their recent summit, though Olaf Scholz and others expressed concern that any such action might violate international law.Barry Eichengreen is professor of economics at the University of California, Berkeley, and a former senior policy adviser at the IMF. Continue reading...

Increase in unemployment and slowing jobs growth will not counteract strong pay pressure

From Canberra insiders to an outsider described as borderline brilliant', here are the runners and riders for the Reserve Bank's top job

Shoppers snap up barbecue food, swimwear, beach towels, outdoor games and garden furniture in JuneBritain's retailers recorded a sharp rise in spending in June as hot weather prompted consumers to buy summer clothing and outdoor goods, despite growing pressure on budgets from the cost of living crisis.The British Retail Consortium (BRC) said sales increased by 4.9% in June, above the annual average growth rate, as shoppers hit the high street to buy swimwear, beach towels, outdoor games, garden furniture and barbecue food. Continue reading...

Andrew Bailey to give speech in City of London signalling further interest rate rises are in storeThe Bank of England governor has signalled further interest rate pain is in store for mortgage holders and businesses as he said Threadneedle Street had to see the job through" on reducing inflation.Hinting that a 14th successive increase in the cost of borrowing would be announced next month, Andrew Bailey is expected to tell the City's elite at the Mansion House dinner on Monday night that inflation is unacceptably high". Continue reading...

Rolling coverage of the latest economic and financial news

In today's newsletter: The prime minister promised to halve inflation this year, and is already struggling. What does that mean for an economy that keeps getting worse? Sign up here for our daily newsletter, First EditionGood morning.You probably don't remember, but last year we ran an edition of this newsletter all about gilts, government borrowing and an economy that was teetering on the edge of a recession. It really felt like, economically speaking, things could not get much worse.BBC | The BBC has suspended a prominent male presenter and called in the police over allegations that he paid a teenager for sexually explicit images, as the corporation struggles to contain a rapidly escalating crisis. It has been alleged that the unnamed BBC star gave 35,000 over three years to a young person who used the money to fund their crack cocaine habit.Westminster | The Guardian has revealed that more than 50 MPs have owned stakes in publicly listed companies that raise questions about possible conflicts of interest and that until now have been in effect secret. Parliamentary rules mean MPs' shareholdings, including ones that were held by the former prime minister Theresa May and the former education secretary Gavin Williamson, do not need to be publicly disclosed in parliamentary registers. But as a result voters are left in the dark about some of the financial interests of their elected representatives.China | Six people have been killed and one person has been injured in an early morning knife attack at a kindergarten in southern China. Local police have said that a 25-year-old man has been detained over the fatal incident.France | France has banned fireworks outside authorised public displays during the 14 July Bastille Day holiday weekend, amid simmering tensions over last month's police killing of a teenager and a brutal arrest at the weekend leading to fresh allegations of police violence.Sudan | Sudan is on the brink of a full-scale civil war" that could destabilise the entire region, the United Nations has warned, after an airstrike on a residential area killed 22 civilians. Continue reading...

Labour's shadow chancellor is proud of her background, sure of her ability - and miserable about the choices she might face after a general electionA member of Rachel Reeves' team asks if I can meet the shadow chancellor in Kettering, Northamptonshire, because she wants to provide the Guardian with original colour". Lovely! What does the original colour consist of, I ask. Well, Rachel's grandparents worked for a shoe factory in Kettering. In fact, Rachel's grandma's health was damaged by working with the glue used in laces." There is one caveat. Unfortunately, the factory her grandparents worked at doesn't do visits, but we can take you to a nearby factory."There is a second part to the original colour. Rachel's grandparents were Salvationists." Blimey, that sounds exciting, I say - what are those? They were in the Salvation Army. And, as you probably know, Salvationists are very principled, caring people." Continue reading...

Sharp uplift in those looking for work reflects growing concern over economy, say analystsBritish businesses are slowing down hiring just as the number of people looking for work rises, according to data that suggested lingering uncertainty" over the economic outlook.The availability of candidates for new jobs rose in June at the sharpest rate since the height of the UK's coronavirus restrictions in December 2020, according to the latest report on jobs by the Recruitment and Employment Confederation (REC) and KPMG. Continue reading...

Pandemic's 20 benefit uplift led to sharp fall in households living in poverty but replacement is far less effectiveThe scrapping of the government's 20-a-week pandemic boost to universal credit has set back the fight against poverty and led to an increase in the number of families struggling on low incomes, a leading thinktank will reveal this week.Research by the Institute for Fiscal Studies seen by the Guardian shows that the emergency programme of universal credit (UC) support led to a sharp fall in the number of households living in absolute poverty during the 18 months it was in force. Continue reading...

Governments focus on the climate when they have few other economic worries. That can no longer be the caseFirst it was the pandemic. Then it was the war in Ukraine. Next it could be the climate crisis.On Monday last week the world registered its hottest-ever day but the record lasted only 24 hours before it was beaten by an even more sizzling Tuesday. And while the temperature continues to warm up the global economy continues to cool down. Continue reading...

Economists failing to predict levels of inflation is bad enough but it's deadly when weather forecasters miss the markEconomic forecasting is not having a good time. Inflation has consistently come in higher than expected and the governor of the Bank of England has admitted there are big lessons about how we operate". MPs and others have been highly critical and an external review of the Bank's forecasting approach has been commissioned.But it's not just economists in the forecasting business. Indeed, new research takes the rubbish forecasts" heat off them by focusing instead on rather more famous forecasters: meteorologists. Predictions of sun or rain, rather than GDP or inflation, are understandably much more important parts of our daily lives. Continue reading...

From clean energy to the NHS, how clear has the party been about how its goals will be achieved? Read more: Champagne with Murdoch: Labour is preparing for powerOne of Labour's biggest commitments so far is to spend 28bn by the end of the parliament on green jobs and industry. While the pledge has been slightly scaled back, the headline figure remains - though there are many blanks about what the money will be spent on.

The opposition must accept there will be huge challenges if they win the election. But they do not have to accept BrexitRecently I was gently taken to task by a Labour supporter for supposedly spending too much time attacking Keir Starmer's weak position on Brexit. Surely I should be more positive about Labour?Well, I have alluded to my justification before, and will do so again today. I remember all too vividly how Harold Wilson's government of 1964-70 was severely limited in the fulfilment of its ambitions by a strategic mistake made as soon as Wilson took office. Continue reading...

Chancellor expected to reveal compact' agreement with some of UK's largest investment firms in Mansion House speechThe chancellor, Jeremy Hunt, will reveal plans to release billions of pounds from British pensions to help fund fast-growing companies, as part of wider government efforts to boost growth and attract more business to the UK.Hunt is expected to tell an audience of City leaders and chief executives on Monday that the government has reached a so-called compact" deal with some of the UK's largest investment firms that could see about 5% of pension fund investments reserved for early-stage businesses in sectors including life sciences and fintech. Continue reading...

Chancellor calls on firms to tackle high prices as government remains far from pledge of halving inflation to 5%Jeremy Hunt has said he must double down" on high prices after admitting a package of pre-election tax cuts this autumn was looking unlikely.The government would not make moves to pump billions of additional demand" into the economy, the chancellor added. Continue reading...

Biden's loan forgiveness plan helped millions breathe - but worries have returned for those struggling to pay backOver the last few decades, the American dream has shifted for the lives of millions of Americans. What once were aspirations to own a home, start a family and lead a successful career has given way to a bigger force: paying off student debt.Those were the people Joe Biden was addressing when he outlined his plans to cancel $10,000 in student debt for 26 million Americans making less than $125,000 last summer. People can start to finally crawl out from under that mountain of debt," Biden said at the time. Continue reading...