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...

Britain is facing a new economic era that will hurt those already struggling, and could radicalise even the previously comfortableThe sleepless nights are here again, then. It's back to the bad old days of poring over a calculator, trying and failing to make the sums add up; back to scrimping and saving, hiding from the bank, wondering dizzily what just hit us.Even before the Bank of England pushed up interest rates to 5% on Thursday, the Resolution Foundation thinktank was warning that anyone coming off a fixed-rate mortgage next year could expect their repayments to rise on average by 2,900 a year. But that's just an average: recently I bumped into a friend whose payments trebled when she remortgaged. She and her partner count themselves lucky as they're earning well enough to absorb the shock, but only by sticking to the absolute bare essentials. No more going out. No more fun stuff.Gaby Hinsliff is a Guardian columnist Continue reading...

Experts say increase from 8.5% may be insufficient to tackle surging inflation some estimate to be 110%Turkey's central bank has raised interest rates for the first time in more than two years, from 8.5% to 15%, but there is widespread concern that the move is insufficient to combat rising inflation and a continuing economic crisis.The decision marks a partial shift in the unorthodox economic policy of the president, Recep Tayyip Erdoan, under which interest rates have been frozen since March 2021 despite a sharp devaluation in the Turkish lira. Continue reading...

Critics say Bank should pay less attention to economic models and more to what is happening on the ground

Move brings borrowing costs to highest level since April 2008 as Bank intensifies efforts to control inflation

Borrowers with expiring fixed-rate or tracker mortgages face difficulties, with some saying they will be forced to sell their homes

The Bank of England is expected to raise interest rates again today, leaving millions of homeowners facing higher costs. Richard Partington reportsBritain's inflation rate remained at 8.7% in figures released yesterday. It means that when the Bank of England announces its interest rate decision at noon today, it will almost certainly raise the base rate from the current level of 4.5%.As our economics correspondent Richard Partington tells Nosheen Iqbal, this rise will pile further pain on to mortgage holders, who are already smarting from successive interest rate rises. Many took on large debts to buy homes during an era of record-low borrowing costs and are now facing monthly bills hundreds of pounds higher than they budgeted for. It comes at a time when utility bills are pinching hard and food prices are at record highs. Continue reading...

Starmer and his party seem to have concluded direct support for homeowners cannot be justified - but it's smart politics to be seen to take on the banksLabour's five-point plan" to ease the pain in the mortgage market can be boiled down to a single idea: get heavy with the lenders - the banks and building societies - to make them play nicely with over-stretched borrowers.One cannot call it a radical idea, however. First, it's in the interests of lenders themselves, up to a point, to be flexible by, say, lengthening the term of the loan, granting a payment holiday or allowing a borrower to switch to interest-only arrangements for a while. Second, many banks say they already have such policies in place, even if critics say they're not advertising them with enthusiasm. Continue reading...

Shadow chancellor Rachel Reeves says party would force banks to take a range of steps to protect borrowersLabour has piled further pressure on Rishi Sunak to take action to help struggling mortgage holders as the Bank of England prepares to raise interest rates again to levels not seen since before the 2008 financial crash.Rachel Reeves, the shadow chancellor, said on Wednesday that if Labour were currently in power, it would force banks to offer a range of support to borrowers, including letting them move on to interest-only mortgages and extending their repayment period. Continue reading...

Former health secretary says understanding important of early quarantining could have helped prevent disease spreading. This live blog is closed