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...
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...
by Kalyeena Makortoff Banking correspondent on (#6CTDS)
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...
Rise was lower than the 240,000 jobs economists had expected though job market remains robustThe US added 209,000 new jobs in June as hiring slowed amid signs the economy is cooling.It was the weakest gain since December 2020, lower than the 240,000 jobs economists had expected and lower than the 309,000 jobs added in May. But the increase was also the 30th consecutive month of jobs gains, and the unemployment rate ticked down to the historically low rate of 3.6%. Continue reading...
by Anna Leach, Pamela Duncan and Rich Cousins on (#6CSAD)
Sausages up 31%, burgers up 64% ... add your favourite foods to our visual tool to see how inflation has pushed up the price in the past five yearsOne of the biggest drivers behind the cost of the British barbecue is meat. In the past five years, the price of four frozen beef burgers has jumped 64.4%, from 2.02 to 3.32, much of that in the past year alone, when the price has increased by 80p. Sausages have also soared, with the price of 1kg rising by more than 1.50 since 2018, up 30.8% compared with May 2018.Data from the Office for National Statistics gives a real-world insight into just how much more we are all paying for 450 everyday items and services, by tracking the average prices over five years. Continue reading...
by Richard Partington Economics correspondent on (#6CS5M)
Thinktank challenges view that those taking early retirement under Covid were relatively well offHalf of older adults who left the UK workforce amid mass redundancies in the first year of the Covid pandemic ended up falling into relative poverty, according to the Institute for Fiscal Studies (IFS).Britain's foremost economics thinktank said job losses during the early stages of the crisis, coupled with the additional health risks faced by older workers, were likely to have forced many people into early retirement. Continue reading...
by Richard Partington Economics correspondent on (#6CRQF)
Markets suffer on both sides of Atlantic as Fed signals more rate hikes and recession fears grow in UKGlobal financial markets fell sharply on Thursday as investors braced for central banks driving interest rates up further to combat high inflation across the world's leading economies.Share prices fell on both sides of the Atlantic with the FTSE 100 tumbling by 161 points, or 2.2%, to finish the day at 7,280 - its lowest level since last November - while stocks fell by a similar amount across Europe and by more than 1% in New York. Continue reading...
by Kalyeena Makortoff Banking correspondent on (#6CRAN)
FCA tells NatWest, Lloyds, HSBC and Barclays to act more quickly to support consumers after profiteering claimsThe City regulator has urged the UK's largest high street banks to accelerate" savings rates following a meeting with chief executives, who admitted they needed to do more to support consumers after claims they were profiteering" from high borrowing rates.The Financial Conduct Authority (FCA) said it was largely a constructive meeting" with bank bosses on Thursday, but challenged firms where their decision making has been slow". Continue reading...
Electricals retailer forecasts another tough year and says many customers are turning to creditCurrys expects sales to continue to fall this year as households buy fewer TVs, laptops and smart speakers because of pressure from the cost of living crisis.The electricals retailer said sales of smart speakers had fallen off a cliff" and people were delaying replacing items such as laptops and TVs as household spending power was squeezed by stubbornly high inflation. Continue reading...
Unnecessarily high fuel prices will have to be tackled to help reduce inflation, suggests Andrew BaileyThe governor of the Bank of England has accused retailers of putting further strain on households by overcharging consumers on petrol and other goods at a time when UK authorities are struggling to curb inflation.Andrew Bailey suggested unnecessarily high fuel prices would have to be tackled in order to help bring inflation - which is above 8% - back to the Bank's 2% target and give some relief to families struggling with the cost of living. Continue reading...
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...
by Richard Partington Economics correspondent on (#6CQQQ)
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...
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...
by Written by Hettie O'Brien and read by Kate Okello. on (#6CNR3)
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...
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...
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...
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...
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...
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...