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...

Kristalina Georgieva says slowdown last year after Covid pandemic and Russian invasion of Ukraine could persist for five yearsThe global economy is heading for the weakest period of growth since 1990 as higher interest rates set by the world’s top central banks drive up borrowing costs for households and businesses, the head of the International Monetary Fund has warned.Kristalina Georgieva, the IMF’s managing director, said a sharp slowdown in the world economy last year after the aftershocks of the Covid pandemic and the Russian invasion of Ukraine would continue in 2023, and risked persisting for the next five years. Continue reading...

French leader sees Beijing as possible ‘gamechanger’ and will also discuss European trade on three-day visitEmmanuel Macron has arrived in China for a three-day state visit during which he hopes to dissuade Xi Jinping from supporting Russia’s invasion of Ukraine while also developing European trade ties with Beijing.Shortly after arriving in the Chinese capital, Macron said he wanted to push back against the idea that there was an “inescapable spiral of mounting tensions” between China and the west. Continue reading...

Jamie Dimon says downfalls of Silicon Valley Bank and Credit Suisse have undermined confidenceThe financial turmoil that led to the downfall of Silicon Valley Bank in the US and Credit Suisse in Europe is not yet over and its effects will be felt for years, the boss of America’s biggest bank has warned.In an annual letter to JP Morgan’s shareholders, Jamie Dimon said last month’s failure of SVB and the Swiss government-brokered takeover of Credit Suisse by its rival UBS had undermined confidence in the banking system. Continue reading...

Former chancellor fundamentally changed the UK economy during his six-year stint at the Treasury, and not much has changed since then

One of the most influential postwar Conservative chancellors seen as the main architect of Thatcher’s radical economic reformsAt the time that Nigel Lawson, Lord Lawson of Blaby, who has died aged 91, resigned as chancellor in October 1989, his departure was immediately interpreted by the more perceptive political analysts as the beginning of the end of the Thatcher years.And so it proved. The man whom Margaret Thatcher once called “my golden boy”, the politician who was credited as the main architect of her government’s economic success, had lit a touchpaper that would smoulder across the months and lead to her ignominious departure a little more than a year later. Continue reading...

Report calls for tighter regulation of non-banks as comfortable decade of low interest rates comes to an endThe near collapse of Britain’s pension funds during Liz Truss’s brief premiership highlights the risk that higher global interest rates will trigger more financial crises in the coming months, the International Monetary Fund (IMF) has warned.In a report, the agency based in Washington DC said the rescues of Silicon Valley Bank and Credit Suisse may not have been isolated incidents and that there was a chance that problems could stretch beyond the traditional banking sector to pension funds, insurers and hedge funds. Continue reading...

MPC member Silvana Tenreyro expects such a move ‘to avoid significant inflation undershoot’The Bank of England may need to cut interest rates earlier and faster as the impact from previous increases drags down the economy and pulls back inflation, one of its senior policymakers has said.Silvana Tenreyro, a member of the central bank’s rate-setting monetary policy committee (MPC), said there were signs inflation would fall “well below” the central bank’s 2% target rate after a sharp decline in global energy prices. Continue reading...

CPTPP membership will result in more deforestation and endanger animal welfare, say campaignersThe UK’s membership of a Pacific trade agreement will result in more deforestation overseas, endanger animal welfare and “make a mockery” of the government’s environmental commitments, campaigners have said.Ministers signed an agreement late last week for the UK to become a member of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a trading bloc of 11 nations including Japan, Canada, Australia and Mexico. Continue reading...

Recent banking turmoil fuels decision to extend trading plan for second time to 2025A plan to whittle down the government’s stake in NatWest has been extended by another two years after weeks of banking turmoil that hit the lender’s shares and temporarily fuelled fears over a fresh financial crisis.UK Government Investments (UKGI), which manages the shares on behalf of the Treasury, said the scheme to strategically sell portions of the British taxpayer’s shareholding – after NatWest’s near-£46bn state bailout in 2008 – would now run until August 2025. Continue reading...

All you need to know about the Opec+ decision to cut production and the potential knock-on effects

KPMG study shows scale of household spending cutbacks, with eating out hit particularly hardMore than half of UK consumers have cut back on discretional spending since the start of the year, with nearly two-thirds choosing to reduce the amount they spend on eating out, according to research from KPMG.As households grapple with a swath of bill increases and tax hikes coming into effect from the start of this month, the survey of 3,000 consumers also found that 49% plan to spend less on non-essentials now that energy bill support payments have come to an end, while 30% will use their savings to cope. Continue reading...

The government is spending five times more on refugees in the UK than it allocates in aid to AfricaDonald Trump never did manage to build the wall on the US’s southern border. Rishi Sunak may have no better luck stopping the small boats with his plan to put refugees on barges or send them to Rwanda.But the extent to which governments will go to “defend” their borders shows just how hot a political topic migration has become across developed western countries. Nor is it just the case in the US and UK. Sweden and Germany have seen the emergence of anti-immigration parties in recent years as the number of migrants has increased. Continue reading...

Being dull but safe won’t help Keir Starmer pull off a big win over the Conservatives. He needs to offer meatier fare than thatHow dull can an opposition party be and still command the kinetic energy to win an election that requires a swing of up to 13 percentage points? Especially as the haul of seats it would need for an outright majority – given its dreadful losses in England in 2019, the SNP’s troubled but hardy grip on Scotland and the fact of fewer Welsh MPs being returned to Westminster – approaches the 145 gained by Tony Blair in the 1997 landslide.Elections do not always vindicate early predictions. Much can happen between now and the election deadline of January 2025 (which effectively means going to the polls in the latter half of next year) that makes yesterday’s “impossible” look like tomorrow’s “told you so”. It would, however, be unwise for Labour to rely, as one of its sharpest advisers on strategy succinctly puts it, on “Tories being crap and Labour being a bit less crap”. Continue reading...

The blight on living standards makes the case for rejoining stronger every day – and this PM is nothing if not pragmaticFor many years, when asked to speak about the British economy, I used to point out that the influence of technological progress on productivity allowed an average growth rate of 2.25% to 2.5% a year. This meant that living standards could double every 25 years or so. Political battles raged over the sharing of the growth, but on the whole most people gained to some extent.No longer! Beneath all the fanciful predictions emanating from this tired government come the hard facts from the independent Office for Budget Responsibility (OBR), the Resolution Foundation and the Organisation for Economic Co-operation and Development. A collapse of investment, with more and more international corporations deciding Britain is no longer the place to invest for a foothold in the European market. And dire forecasts of a 6% fall in living standards in the next two years. Some platform for an election, eh? Continue reading...

Explainer: Report’s recommendations on the central bank are due out this month. Here’s what you need to know

Hailed by Tory MPs as a Brexit benefit, CPTPP membership actually turns the UK into a willing pawn in Washington’s geopolitical gameTory MPs hailed the UK’s entry last week into the Indo-Pacific trading bloc as a major step on the road to re-establishing Britain as a pioneer of free trade.It was a coup for Rishi Sunak, said David Jones, the deputy chairman of the European Research Group of Tory Eurosceptics, who was excited to be aligned with “some of the most dynamic economies in the world”. Continue reading...

After UK narrowly misses recession IoD reports rise in business demand, confidence, hiring and investment in MarchBritain’s businesses are reporting a spring surge in order books, boosting hopes that the economy may finally be recovering after flirting with recession late last year.After official figures showing the UK performed slightly more strongly than originally thought towards the end of 2022, the Institute of Directors said there had been an improvement in demand, confidence, hiring and investment intentions in March. Continue reading...

Average UK house prices fell 3.1% in year to March, while energy costs are now falling in the eurozone and US core PCE inflation has dropped

PM also refused to say what he would do if inquiry into Dominic Raab found justice secretary bullied officials. This live blog is closedThe UK government has announced a £57m funding package to support Northern Ireland charities and community organisations facing a financial crisis due to a loss of European money, PA Media reports. PA says:Eighteen projects across the region will receive backing through the UK shared prosperity fund with a focus on groups helping support people into work.The announcement comes just a day before financial support provided by the European social fund comes to an end due as a consequence of Brexit. Some charities in Northern Ireland had warned they would have to cut staff and support programmes if funding was not replaced. Continue reading...

Annual rate down to 6.9% this month, with signs of cost of living pressures easingThe eurozone’s annual inflation rate fell sharply in March as plunging energy prices eased pressure on the cost of living across the 20 countries that use the single currency.Amid signs that upward pressure on prices is easing, the EU’s statistical agency Eurostat said the headline inflation rate dropped from 8.5% in February to 6.9% this month. Continue reading...

Comments threaten to worsen already tense relationship between senior ministers and civil servants

Study commissioned by Guardian details scale of hit to household finances from April

Unions have condemned clauses in deal that will allow large firms to sue UK government behind closed doorsBritain has joined the 11-member strong Asia-Pacific trade bloc that includes Japan and Australia after nearly two years of negotiations.The deal, part of a push to agree worldwide trade deals after Brexit, secures access for British exporters to 500 million people in the 11-member Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). Continue reading...

Economist predict Spain’s inflation will keep falling, after a drop in energy prices this month eased the cost of living crisisFour bankers who helped a close friend of Vladimir Putin move millions of francs through Swiss bank accounts have been convicted of lacking diligence in financial transactions.Reuters has the details, from Zurich:The four were found guilty on Thursday of helping Sergey Roldugin, a concert cellist who has been dubbed “Putin’s wallet” by the Swiss government.The executives - three Russians and one Swiss - helped Roldugin, who is godfather to Putin’s eldest daughter Maria, deposit millions of francs in Swiss bank accounts between 2014 and 2016. Continue reading...

Outgoing boss David Malpass says more money needed to combat overlapping crises of war, pandemics and climate emergencyA dramatic increase in financial help is needed to help poor countries meet the $2.4tn (£1.9tn) annual cost of coping with the combined impact of wars, pandemics and the climate crisis, the outgoing head of the World Bank has said.Speaking in Niger, David Malpass defended his record for funding support for developing countries since becoming president of the Washington-based organisation and said further increases would probably be announced at the Bank’s spring meeting next month. Continue reading...

Push to block platform reflects rising distrust of China and limited understanding of tech worldThe spectacle of the US Congress grilling TikTok CEO Shou Zi Chew on 23 March could one day be remembered as a turning point in the history of globalisation. Over five hours of aggressive questioning, Chew – who is not Chinese, but Singaporean – did a magnificent job of defending his company’s Chinese ownership in the face of Congress’s limited understanding of the tech world.The Biden administration views TikTok as a potential national-security threat and wants its Chinese-owned parent company, ByteDance, to sell the platform to a US-owned company or face a possible ban. Chew, however, proposes that ByteDance retain its majority ownership of TikTok but have its US operations run entirely by the Texas-based tech giant Oracle, which would store all US user data on its servers and monitor how TikTok’s algorithms recommend content. Meanwhile, the Chinese government has said that it would oppose a forced sale. Continue reading...

This blog is now closed.

Treasury committee holds hearing on the sudden collapse of Silicon Valley Bank this month

Prices rise fastest for eggs, milk and cheese amid shortages of salad and other itemsSupermarket price inflation in the UK has hit another record high, raising the increase in average annual household bills to £837, as shoppers increasingly turn to multiple supermarkets to hunt for bargains.Year-on-year price increases for groceries hit an all-time high of 17.5% in the four weeks to 19 March compared with a year earlier, according to the latest figures from the data firm Kantar. The prices of eggs, milk and cheese are rising at the fastest pace. The latest price rises mean an average annual household bill for groceries is £5,617, Kantar said. Continue reading...

Asked if he could have anticipated the collapse of the Silicon Valley Bank, the Bank of England governor said it was probably the fastest collapse of a bank he had seen in his three-decade long career.'It is probably the fastest passage from health to death since Barings,' said Andrew Bailey, speaking before a Treasury select committee on Tuesday. Comparing the collapse of Silicon Valley Bank to Barings, which went under in 1993, Bailey added: 'Barings, as you will remember, was a sort of Friday to Sunday thing and this was pretty similar'

Shares in First Citizens Bank surge 45% as it agrees to buy much of Silicon Valley Bank, while Saudi National Bank’s Ammar Alkhudairy resigns

My friend and former colleague Graham Pyatt, who has died aged 86, was a founding member of the department of economics at the University or Warwick, having been appointed professor of mathematical economics there at the age of 28.While at Warwick he was influential in the creation of several degree programmes, was also a consultant to the accounting firm Coopers and Lybrand (1968-74), and was responsible for the early BBC Election Night computer predictions (1968-74), presenting cameo insights into the results, on-screen, alongside the political scientist David Butler. Continue reading...

Kristalina Georgieva joins others in voicing fears about threat to world economy after recent bank collapsesThe head of the International Monetary Fund has warned that the global economy faces risks to its financial stability because of the turbulence in the banking sector.Kristalina Georgieva, the managing director of the Washington-based lender of last resort, said rising interest rates had put pressure on debts, leading to “stresses” in leading economies, including among lenders. Continue reading...

Governor Andrew Bailey has had to accept that the economy is resilient, but he’ll still find reasons to keep interest rates highFrom the fog of contradictory economic data over recent months comes a sense of direction. Suddenly, there is no more talk of recession, even as business surveys show firms doing OK. Instead, the picture is clear and there is no doubt the economy is growing again.A slump that was supposed send the economy backwards in the first half of this year has vanished, notwithstanding worries about a global banking meltdown and credit crunch. That leaves predictions of a decline in economic activity being replaced by an expansion during the second, third and fourth quarters of 2023. It’s quite a turnaround. Continue reading...

Cat food brand caught in shrinkflation storm as owners say new pouches and recipe leaves pets hungryThe mercurial nature of cats means owners spend a lot of time trying to understand “cat speak”. However, the chances that loud miaowing is about food have increased after Whiskas not only slashed the size of its cat food pouches but changed the recipe .The price of Whiskas has risen sharply in the past year and pet owners have taken to the brand’s Facebook page to vent their outrage over the smaller packets, which are 85g rather than 100g, but cost the same. Others complain their cat does not like the “new taste” and, in extreme cases, that it disagrees with them. Continue reading...

Critics of corporate behaviour over the pandemic and Ukraine war say company profit and loss accounts tell their own story