The Bank of England has so far failed to return the annual rate to its 2% target – so what are the options?Inflation has remained stubbornly high in the UK, with the latest data released this week showing it dropped only slightly in March, staying above 10% for the eighth time in the past nine months.The government has so far mostly relied on the Bank of England to try to return the annual rate of price rises to its 2% target, something it has clearly failed to do. Continue reading...

Economists predict inflation will prompt Bank of England to lift rates again in May, for last time in current cycle

Increase to 4.5% will be last rise in current cycle, former rate-setter Michael Saunders predictsThe Bank of England is likely to increase interest rates one more time in May, to 4.5%, before inflation falls “sharply” over the rest of the year, a former rate-setter has predicted.Michael Saunders, who was a member of the monetary policy committee until August, said the UK was nearly at a “turning point” for interest rates, which have risen sharply over the past year as policymakers tried to curb a surge in prices caused by an increase in energy costs. Continue reading...

UK inflation failed to drop into single-digit levels last month as food prices kept soaring, meaning central bank expected to raise borrowing costs again

Annual rate as measured by consumer prices index dropped to 10.1% in March, says ONS

Annual rate still above 10% as grocery prices soar, leaving MPC on course for another increase

Sugar, sauces, milk and cheese – we look at what is behind the March food inflation figure and if there is hope on the horizon

From sugar to bread, electricity to pet products, how costs have soared

This online tool will help you discover what is contributing to your household’s cost of living increasesInflation is soaring in the UK as people are hit by higher prices for everyday essentials.Now in double digits, the latest inflation rate for the 12 months to March 2023 means that goods and services cost over 10.1% more than they did a year ago – in most cases, surpassing any pay rises workers can expect to receive. Continue reading...

More firms are at risk of tipping from ‘danger’ to ‘distress’, experts warn, as businesses are hit by soaring costs and weak economy

Inflation may drop below 10% on Wednesday, but many items have risen even higher than the headline rateThe UK inflation rate could drop out of double digits for the first time since last summer when the Office for National Statistics releases figures for March on Wednesday, with the headline rate expected to fall back to 9.8% from 10.4% in February.Despite the predicted fall, the headline rate of inflation has been stuck at 40-year highs for months and is well above the Bank of England’s official 2% target. Continue reading...

Annual inflation may drop when official figures are released on Wednesday but UK rate still higher than eurozoneBritain’s annual inflation rate is poised to fall below 10% for the first time since last August when the latest official figures for the cost of living are released on Wednesday.A sharp fall in energy prices is thought likely to have dragged down the government’s preferred measure of inflation from 10.4% in February to 9.8% in March, according to a poll of economists conducted by Reuters. Continue reading...

Softer conditions in jobs market means unemployment rate unexpectedly edges higher to 3.8%

Insolvency Service says 2,457 businesses went bust in March as firms struggle with rising bills and high inflation

Deal would build closer economic ties as most western states push to isolate Moscow over UkraineIndia and Russia have entered “advanced negotiations” over a free trade agreement that aims to build closer economic ties as most western governments push to isolate Moscow over the war in Ukraine.In a development likely to add to tensions in Washington, London and EU capitals, Russia and India’s trade ministers said on Monday the two countries were in talks to strike a free trade deal. Continue reading...

Rishi Sunak wants growth, but ONS figures show rising levels of inactivity because of ill-health

The omnipresence of consultancies is harming public services, while creating lucrative opportunities for private profitShortly after Margaret Thatcher took power, her environment secretary, Michael Heseltine, wrote: “The management ethos must run right through our national life – private and public companies, civil service, nationalised industries, local government, the National Health Service.” Since 1980, ministers have stayed true to his word. Britain is the outsourcing capital of Europe. No other country on the continent relies so heavily on the consulting industry to do the work of the state. Earlier this year, ministers quietly dropped restrictions on spending controls, allowing Whitehall departments to potentially spend even more on external consultants.Those controls were the product of David Cameron’s 2008 pledge to end what he called the reign of “policy by PowerPoint”. Mr Cameron correctly argued that the use of consultancies had exploded under New Labour, whose faith in the credo of New Public Management, an agenda that sought to make the public sector function more like a business, produced lucrative opportunities for consultancies. Yet the story was hardly different under the Conservatives. While spending on consultants initially decreased under Mr Cameron’s government, economists Mariana Mazzucato and Rosie Collington note that consultancy firms bid for contracts at cut-price rates in an attempt to gain a foothold in government. When the time came for the state to spend big, the consultants would be ready. Continue reading...

Rolling coverage of the latest economic and financial news, as UK’s blue-chip index heads for seventh day of gains in a rowEuropean stock markets are also moving higher this morning, with Germany’s DAX up 0.16% and Italy’s FTSE MIB gaining 0.25%.Pierre Veyret, technical analyst at ActivTrades, explains:European shares openened on a positive note, following the lead of Asian benchmarks, as risk appetite remains strong at the beginning of this new week.The bullish sentiment continues and investors may be willing to push stock indexes to new highs, despite lingering concerns over higher borrowing rates and economic recession. This sustained appetite for riskier assets may come from the fact some investors see the current monetary tightening cycle to be closer to the end than the beginning, while expecting a shallower recession than initially anticipated.“Certainly that’s good news for the Bank of England, and it does make the May decision a really close call.” Continue reading...

PM urges Britain to prize numeracy, but critics say such talk counts for nothing without a funded planThe UK possesses an inherent “anti-maths mindset” that is hampering efforts to improve numeracy, Rishi Sunak is to say as he relaunches his plan to make maths education until 18 compulsory.In a speech to students, teachers and others in north London planned for Monday, the prime minister is expected to argue that a failure to consider numeracy as basic a skill as reading is costing the UK economy huge sums. Continue reading...

Foreign secretary says ‘free and open Indo-Pacific’ is ‘critical to UK’ and releases manga-style cartoons to mark his visitJames Cleverly has arrived in Japan for a G7 foreign ministers’ summit to promote a “free and open” Indo-Pacific, as the UK government steps up its focus on the region after Brexit.The foreign secretary and his counterparts from countries including the US and France will hold high-level talks on closer security and defence ties in the face of China’s growing assertiveness in the Pacific. Continue reading...

Bridgetown Initiative could be way for rich nations’ development finance words to become actionKristalina Georgieva is one of life’s optimists, so it was no surprise that the managing director of the International Monetary Fund found things to be cheerful about at last week’s gathering of finance ministers and central bank governors in Washington.The two Bretton Woods institutions – the IMF and the World Bank – meet every six months, and since October, fears of a deep recession have receded. As Georgieva noted, the global economy has shown unexpected resilience. Energy prices have come down and that makes the outlook for inflation better. What’s more, the IMF chief said there was a can-do approach at the meeting. Continue reading...

Attacks on Rishi Sunak are pointless if Labour is going to let the crowning disaster of Tory government pass without commentFirst we hear from the International Monetary Fund that the UK economy is bottom of the G7 class. Then come the absolutely disastrous export figures for October-December from the Office for National Statistics: the volume of exports was more than 9% below the pre-pandemic average. This compares with a double-digit increase in Italy’s exports – er, yes, a country which is still a member of the European single market.There was a time when devaluation of the pound revived exports. No longer. Brexit and the damage wreaked by a succession of Conservative governments have seen to that. The pound has been spectacularly devalued against the dollar and the euro since the Brexit referendum. This has done precious little to boost exports but has had an all too obvious effect on import prices. Hence inflation in the UK is worse than in other industrial countries – thanks to, guess what, Brexit. Continue reading...

Hopes for a drop in the headline rate are pinned on lower oil and gas prices, but it could still go the other wayFor months there has been hope that inflation might come tumbling down from its highest rate in 40 years. In search of an elusive peak, and despite having already made several wrong calls, some forecasters are suggesting that a rapid decline is all but “guaranteed”.This week will put those expectations to the test, with the publication of a range of economic data that will influence the Bank of England as it considers whether to hit the pause button on its most aggressive policy of interest rate rises in decades. Continue reading...

The pound strengthened as data showed US economy cooling, before Fed policymaker vowed to press on with interest rate risesAldi and Lidl have cut the price of milk to match Tesco and Sainsbury’s as the annual ‘spring flush’ rise in production leads to oversupply.The price cuts are the first since 2020 as rises in energy, fertiliser and feed prices have led to a surge in the price of milk since then. Continue reading...

Package similar to 2005 deal needed as struggling African countries suffer severe funding squeeze, says officialWestern countries need to put together a debt relief and aid package to match that of the landmark Gleneagles summit deal in 2005 in order to counter a severe funding squeeze affecting struggling African countries, the International Monetary Fund has said.Abebe Selassie, the director of the IMF’s African department, said without a scaling up of financial support some of the world’s poorest countries would have no chance of meeting the 2030 UN goals for poverty reduction. Continue reading...

Analysis covering first quarter of last year raises questions over role of speculators in inflating food prices

Warning from Kristalina Georgieva after G7 explores economic resilience, secure global supply chains and less reliance on ChinaFragmentation of the global economy into rival trading blocs runs the risk of prompting a new cold war, the head of the International Monetary Fund has said.Kristalina Georgieva, the IMF’s managing director, said a combination of the Covid pandemic, the war in Ukraine and shortcomings with globalisation had led to a potentially dangerous splintering. Continue reading...

Chancellor’s remarks come despite industrial action being major factor in zero GDP growth in FebruaryThe government is willing to accept short-term damage to the economy from public sector strikes rather than give in to pay demands and risk a longer-term hit from persistently higher inflation, Jeremy Hunt has insisted.Speaking in Washington, the chancellor said he “completely understood” public anger at the high cost of living but added that the impact of rising prices would be longer lasting and more damaging if ministers acceded to “hard to justify” pay demands. Continue reading...

Governor has played down repeat of financial crisis but review of payout policy points to unhappy memoriesWhen Andrew Bailey revealed in a speech that the Bank of England was working on updating Britain’s deposit insurance guarantee scheme, which gives government protection on savings up to £85,000 in the event of a bank run, it was with one eye on the recent shocks, and the other on events from 15 years ago.Northern Rock, Bradford & Bingley, and Icesave may sound like names from another era, but the memory of what happened in 2007 and 2008 still reverberates around the Bank’s Threadneedle Street offices to this day. Continue reading...

Latest GDP report shows that civil service and teachers’ strikes held back service sector growth, leading to no growth in FebruaryTom Stevenson, investment director for Personal Investing at Fidelity International, also predicts the UK will suffer a year of stagnation in 2023…. before a modest rebound next year.He fears the UK is the ‘weak link’ among developed economies (as shown by the IMF’s latest forecasts, which Jeremy Hunt has vowed to beat).The British economy failed to grow at all in February, confirming that, while the UK may avoid recession, it is the weak link among the developed world’s economies. The UK’s growth is slower than in other rich countries and its inflation higher. We face a year of stagnation in 2023 before a modest rebound next year.‘Although January’s growth was revised up slightly to 0.4%, February’s flat line reflects the impact of the UK’s winter of discontent. Strike action took the shine off a modest increase in retail sales, while falling production in the month offset better construction activity.“A combination of upward revisions in GDP data and an improvement in global economic conditions could help the UK economy avoid a recession this year. While this will provide relief for policymakers, the outlook for growth in the medium-term remains relatively weak by historical standards.“Economic activity will remain subdued in the near term as households continue to be squeezed by elevated prices and the cumulative impact of past interest rate increases. Although business sentiment continues to improve, bolstered in part by the fall in wholesale energy prices, we expect investment to be constrained this year amidst the tightening in credit conditions and uncertainty about future policy direction. Continue reading...

Number of working-age adults in work or job hunting is still lower than before pandemic, OECD figures showBritain has emerged as the worst-performing country in the G7 for workforce participation since the Covid pandemic, after an exodus of half a million people at a time of record levels of long-term sickness.Figures from the Organisation for Economic Co-operation and Development (OECD) showed the UK’s labour force participation – the percentage of working-age adults either in work or job hunting – was 78.6% in the final three months of 2022, down from 79.5% in the same period at the end of 2019. Continue reading...

As recent banking failures in US and Europe show, rich countries can act quickly when they want toAfter a decade or more in which they have been obsessed with their own problems, countries in the wealthy west are starting to wake up to the risk of a looming debt crisis in poorer parts of the world.This week’s gathering of the International Monetary Fund and World Bank in Washington has been marked by a discussion about what to do about countries that are in debt distress or on the brink of it. Continue reading...

Governor reveals review of payout policy after failures of Silicon Valley Bank and Credit Suisse in March

Wave of public sector strikes and weak industrial output take toll, official figures show

The 2010s were a wasted decade for economies and the environment. The 20s have all the makings of a secondRemember the roaring 20s? Even as Covid gripped the world, optimists piped up that the economy would come roaring out of the pandemic, bolstering incomes and kickstarting an almighty boom. Harking back to the Spanish flu pandemic of a century earlier, they saw a decade of glorious growth ahead.Well, they were wrong. Ahead lies not roaring but snoring; no boom, but ever-deepening gloom. That is the message from the International Monetary Fund and the World Bank, which are holding their spring meetings in Washington DC this week. In its economic outlook, the IMF not only outlines what a mediocre few years lie ahead, it is also worried that things could get even worse. As for the World Bank, it has published a 564-page book whose chief preoccupation is in its title: Falling Long-term Growth Prospects. It warns of a “lost decade in the making”, and projects that the meagre growth of the 2010s will “extend into the remainder of the current decade”. We may be less than a third of the way into the 20s but, as far as the serried ranks of the top economists in Washington are concerned, it is already game over. Continue reading...

Exclusive: Leaked recording raises concerns over governance at development bank, at which David Malpass is now presidentWorld Bank staff were apparently told to give preferential treatment to the son of a high-ranking Trump administration official after the US Treasury threw its support behind a $13bn (£10bn) funding increase for the organisation, a leaked recording suggests.Shared with the Guardian by a whistleblower, the recording of a 2018 staff meeting suggests colleagues were encouraged by a senior manager to curry favour with the son of David Malpass, who is now president of the World Bank but at the time was serving in the US Treasury under Donald Trump. Continue reading...

Forecast by Washington-based body puts at risk Rishi Sunak’s pledge to cut debt as share of GDP

Speculation of further 0.25-point increase in rates after speech by Bank of England governor to IMFThe governor of the Bank of England, Andrew Bailey, has played down the risks of a system-wide banking crisis, paving the way for further interest rate increases to combat the UK’s high inflation levels.Despite the recent problems that affected regional banks in the US and Credit Suisse in Europe, Bailey said the reforms to make banks safer after the 2008 global financial crisis had worked and there was no need to alter Threadneedle Street’s approach to setting borrowing costs. Continue reading...

International Monetary Fund forecast echoes predictions from Treasury and RBA and warns ‘ominous forces’ may be behind global economic strains

In a bleak report from the International Monetary Fund (IMF), the UK is forecast to be one of the poorest performing major economies among the G7 nations in 2023.Although the IMF slightly upgraded its last forecast, it still anticipates a contraction in the UK economy this year. Contributing to the strong headwinds faced by the UK, the IMF underlined the mounting effects of elevated energy costs, persistent inflation and financial risks from raised interest rates

International Monetary Fund forecasts UK GDP will shrink by 0.3% in 2023, worse than other G7 countries

IMF says euro area and UK – one of only two G7 countries forecast to contract in 2023 – especially hit by energy costs and inflation

Fund is more cautious about world economic outlook after turmoil at Silicon Valley Bank and Credit Suisse

Consumers reduce spending on groceries, clothes and eating out as they seek to balance budgetsUK consumers cut back on groceries, clothes shopping and eating out last month but streaming and pay TV subscriptions jumped as cash-conscious viewers switched to nights in.The return of big hit series such as Succession, The Mandalorian and Ted Lasso fuelled a healthy 4.1% increase in spend on digital content and subscriptions in March, the highest year-on-year rise in five months, according to Barclays’ regular snapshot of consumer credit and debit card use. Continue reading...

IMF suggests invasion spending is pushing up GDP but academics argue non-military economy is founderingThis week the International Monetary Fund will assess how well Russia’s economy has held up during the Ukraine war and is expected to estimate it had a mild downturn last year, faces a small contraction this year and will enjoy a healthy level of growth in 2024.This seems to contradict the warning from shortly after the invasion that the country faced a contraction of up to 15% and last month’s prediction from the oligarch Oleg Deripaska that international sanctions would drain the Kremlin’s finances by next year. Continue reading...

Sunak or Starmer will win votes – and most UK households will gain – if they replace the council taxRishi Sunak needs a gamechanger to have any hope of leading the Conservatives to victory at the next general election. Sir Keir Starmer could do with something to seal the deal with the British public.The conventional wisdom is that there are no easy wins available to either the prime minister or the leader of the opposition in these straitened times. But the conventional wisdom is wrong. There is one policy that would be both popular and make economic sense, and that is reform of the UK’s property taxation. Continue reading...

October saw the UK chancellor in the hot seat. Now the US’s Janet Yellen will face flak over green subsidies and banking securityAs a spectacle, this week’s half-yearly gathering of the world’s finance minsters and central bank governors in Washington will be hard-pressed to come up to the standards of the last occasion they met, in October 2022.Inflation was soaring, there were fears that the squeeze on businesses and consumers would plunge the world into recession and war was raging in Ukraine. Yet it was the UK that was the talk of the annual meetings of the International Monetary Fund and the World Bank – and for all the wrong reasons. Continue reading...

By kicking retirement reforms down the road again, vote-hungry politicians are allowing a wealthy generation to prosper at the expense of the youngThere is an election coming, so reforms that harm the finances of older voters are off the table.The over-50s dominate participation in local polls even more than they do in general elections, so it was little wonder that a proposal to bring forward the date when the state pension age starts to rise to 68 – adversely affecting millions of people born in the 1970s – was considered toxic by the government and kicked into touch at the end of last month. Continue reading...

Traditional roast lamb will also make a bigger dent this year as lamb and goat prices climb by 9.4%The cost of Easter has soared by nearly a quarter compared with last year, as inflation hits popular items including chocolate eggs and hot cross buns, analysis suggests.While millions prepare to celebrate over the Bank Holiday weekend, research compiled by the Labour party found bills for supermarket staples will be, on average, 23% higher. Continue reading...

March saw fewer jobs added to economy compared with February as effects of Fed’s interest rate increases are feltThe US added 236,000 jobs in March, a sign of gradual weakening in the labor market as the effects of the Federal Reserve’s interest rate increases start to be seen in the economy.Friday’s closely watched jobs report provides data that will heavily influence the Fed’s decision to either halt or continue interest rate hikes at its next board meeting in early May. The non-farm payrolls data published by the Bureau of Labor Statistics’ (BLS) suggested a slowdown in the jobs market in the world’s largest economy last month, after an upwardly revised 326,000 jobs were added in February and 504,000 in January. Continue reading...