Blue-chip share index climbs on hopes that inflation has peaked, while Turkey’s stock market halts trading after main index drops 7%

Country likely to sidestep a protracted recession, but lasting effect of cost-of-living crisis ‘will feel like a recession’Households in Britain will suffer a hit to their finances of up to £4,000 this year, according to a report warning that the economy could avoid recession but that, for millions, it will not feel like it has.Adding to pressure on Rishi Sunak as the government prepares to scale back its support for energy bills this spring, the National Institute for Economic and Social Research (NIESR) said low and middle-income households were facing the biggest financial hit from the cost of living crisis. Continue reading...

Dame Alison Rose, the head of NatWest, tells MPs her bank is preventing customers from investing in crypto assets, as part of a crackdown on fraud.Danny Blanchflower, a former Bank of England policy maker, has predicted that “collapsing” house prices will push the UK central bank into a rapid pivot toward interest rate cuts.Blanchflower, who is now a professor of economics at Dartmouth College, told Bloomberg Radio that economic data will deteriorate as the sharp increase in interest rates hit activity.“We are seeing house prices tumbling.You’re going to start to see really bad stuff appearing as these economies slow fast and the central bank and the markets are then going to respond to that.As I sat at the Bank of England, my job was to think about what inflation was going to be at about 18 months to two years down the road. And you change rates now because it takes time to have an effect.“What people should see is a collapsing housing market, a slowing economy and the reason is that these interest rate hikes that have been going crazily haven’t actually impacted the economy yet.”We need continuing near-term investment into today’s energy system - which depends on oil and gas - to meet today’s demands and to make sure the transition is an orderly one. We have high-quality options throughout our portfolio, allowing us to choose only the best.We will prioritise projects where we can deliver quickly, at low cost, using our existing infrastructure, allowing us to minimise additional emissions and maximise both value and our contribution to energy security and affordability.” Continue reading...

British Retail Consortium says sales growth slowed in January amid soaring costs for energy and foodBritish consumers sharply cut their spending in January as the cost of living crisis damaged household finances, retailers have warned, amid growing concern over the impact of high inflation on the economy.The British Retail Consortium (BRC) said sales growth slowed last month despite retailers offering steep discounts in the January sales, with households reining in their spending in the face of soaring costs for energy, food and other basic essentials. Continue reading...

Former PM insists, however, that it is unfair to blame actions she took in office for rising mortgage ratesLiz Truss has admitted cutting the 45p tax rate was “perhaps a bridge too far” but said it was not fair to blame her mini-budget on rising mortgage rates.The former prime minister said she did not regret her time in No 10, and that she hoped to stay in the political arena making the case for low taxes and growth within the Conservative party. Continue reading...

The next step in Bank Rate is still more likely to be another hike than a cut or hold, says Bank of England policymaker Catherine Mann

Inflation could become entrenched as Covid, energy shock and Brexit hit economy, says Catherine MannA senior Bank of England policymaker has warned the central bank could be forced to keep raising interest rates to prevent high levels of inflation from becoming entrenched in the economy.Catherine Mann, an independent economist on the Bank’s rate-setting monetary policy committee (MPC), said there were “material upside risks” to inflation sticking at higher levels than expected as the impact of the Covid pandemic, Russia’s war in Ukraine and Brexit weigh on the economy. Continue reading...

Senior economists and ex-chancellor George Osborne round on former PM after she says Treasury officials raised no concernsSenior economists and the former chancellor George Osborne have cast doubt over Liz Truss’s account that she was not warned about the risks to the UK economy as she prepared her mini-budget.Truss, in her first major intervention since leaving office, wrote that she had “not [been] given a realistic chance to enact my policies by a very powerful economic establishment, coupled with a lack of political support”. Continue reading...

Attlee was a gifted manager, who showed it possible for modest politicians to be successful if they have decent ideasWinston Churchill once described Clement Attlee as a modest man with much to be modest about – and up to a point he was right. Attlee was in many ways the epitome of bourgeois respectability: he was privately educated, had a house in the London suburbs and liked nothing better than to occupy his spare time by cracking the Times crossword or catching up on the cricket scores.Yet in 1945, the British public chose the modest man over the wartime hero, and Attlee showed over the next six years that a politician does not have to be charismatic to be effective. A modest man turned out to be one of the few UK prime ministers of the 20th century who actually changed Britain. Continue reading...

Politicians and the media often present policies as moral duties, when they are nothing of the sort“I can’t live on the never-never and neither can this country… Austerity was a necessary evil… The unemployed will only work if they are forced to.”No, not the sound of the pub bore, but some of the often unstated assumptions that underlie policymaking and the reporting of such policies. Two very different reports published last week, one from the BBC, the other from the Institute for Fiscal Studies (IFS), reveal, the one explicitly, the other implicitly, the significance of these submerged beliefs in shaping our lives and our perceptions. Continue reading...

Having been grossly misled in the referendum, Britons’ anger is mounting as the reality of our plight becomes clearCommentators, politicians and economists tend to think they are quoting John Maynard Keynes with: “When the facts change, I change my mind. What do you do, sir?”I have always been suspicious of the derivation of this putative remark. Even in this modern world of fake news, facts do not change. New information may come to light, but facts are facts. I don’t think there is any evidence that Keynes ever perpetrated such a canard, and nor does Keynes’s distinguished biographer, Robert Skidelsky. Continue reading...

December’s GDP was boosted by us all cranking up the heating. Actual economic growth has not looked so weak in decadesA glance back at 2022 will show that the economy held up better than some forecasters expected. The Bank of England was among many to expect the second half of last year to see the start of a recession that would stretch into 2023.As it is, it now expects that, when they are published on Friday, official figures for gross domestic product (GDP) in the last three months of 2022 will show this was narrowly avoided. Continue reading...

Wyre Forest in the West Midlands has seen a huge jump in the ‘economically inactive’, many of them affluent older people, but the dearth of workers is a real problem for employers“I always laughed at people who said they’d never been so busy since they retired,” says David Richards, mopping his brow as he takes a break from the fast-paced game at Wyre Forest Leisure Centre near Kidderminster.At 58, the retired GP from nearby Bewdley is among the younger players in this midweek morning game of pickleball – a cross between tennis and badminton that is growing rapidly in popularity across Britain. Continue reading...

UK’s blue-chip index has hit a new record high of 7906 points, helped by weak pound, and hopes that interest rates may be near their peak

The blue-chip Footsie has closed at an all-time high while the UK’s economy is set to shrink

Workers should not be paying for a recession that they did not causeRishi Sunak marked 100 days in office by claiming the country cannot afford “massive” pay rises for nurses. In a TV interview, the prime minister on Thursday said he’d “love to give the nurses” the money because it would “make my life easier”, but added: “Even if it’s not popular, it’s the right thing for this country to stay the course.” Mr Sunak was so unmoved by the biggest day of industrial action over pay in more than a decade that even the most popular of causes would not be entertained. Earlier that day the Bank of England hiked interest rates, causing more pain for hard-pressed households and businesses.The recession now forecast as a result is the price workers are paying for inflation that is driven by supply costs in food and fuel being wrongly cast as driven by demand. This is no accident, as an insightful report by the Trades Union Congress makes clear this week. Since 1979, economic policies have seen a “doom loop in GDP, and a parallel ‘boom loop’ in wealth”. The doom loop starts with the government claiming that it has to “fix” the public finances, and proceeds by public spending cuts which then lead to lower demand and lower growth – with the cycle restarting. This flies in the face of evidence that infrastructure spending pays for itself through extra economic growth. Such inconvenient facts are dismissed. Continue reading...

Total is far higher than what economists expected even as Federal Reserve continues to raise interest rates to bring down inflationThe US job market added 517,000 jobs in January, a huge gain for the labor market even as the Federal Reserve has pushed up interest rates to bring down inflation and try to temper hiring.Meanwhile, the unemployment rate has held relatively steady at 3.4% – a 0.1% decrease compared with last month. Economists had expected the unemployment rate to rise slightly last month, but the rate still remains on par with what was seen before the pandemic. The rate is a 53-year low, according to Bloomberg. Continue reading...

Inflation should be back within Bank’s 2% target range by middle of 2024, Huw Pill addsThe Bank of England is alive to the risk of pushing interest rates too high, its chief economist has signalled, adding to expectations that it could be nearing the end of a sustained period of rate rises.Speaking a day after the Bank raised interest rates for a 10th successive time, by 0.5 percentage points to 4%, Huw Pill said the full impact of its rate increases had not yet been felt in the UK economy. Continue reading...

I risked prison to stand up against an system that will lead to ecological and societal collapse – we must look for alternative economic models, writes Zoe CohenI have read many Guardian articles on “economic growth”, but on reading this one (Britain the only G7 economy forecast to shrink in 2023, 31 January), I felt I had to write to you. On Friday 27 January, I and six other women received suspended prison sentences for carefully cracking windows at Barclays global HQ in April 2021. We did this to call out Barclays as Europe’s biggest fossil fuel funder, and one of the world’s leading “investors” in ecosystem destruction and plastics pollution. But I also took that action, and risked prison, to call out the whole political economy and the growth-based system that is driving us all off a cliff.I find it deeply distressing that the Guardian does such strong journalism on for example, carbon bombs and the truths behind carbon offsets, and yet seems not to join the dots with economic growth. Surely you understand that GDP has an almost 1:1 relationship with both energy and materials use? And this isn’t going to change any time soon, certainly not in the handful of years we have to body swerve away from Earth system tipping points. Continue reading...

Hike of 0.5 percentage points lifts rates to 14-year high, but BoE says shorter and shallower recession now more likely

From mortgages to credit cards, we break down the impact the 4% rise could have on your finances

Threadneedle Street is still expecting a recession but it is likely to be a mild one by UK standards

Bank puts aside more money to protect itself from potential defaults in expected recessionThe impending recession could leave borrowers struggling to repay their debts, the high street bank Santander UK has said as it put aside more cash to protect itself from potential defaults.The UK arm of the Spanish bank said on Thursday that while the outlook for the British economy remained uncertain, a recession in 2023 was likely. Continue reading...

Tories blamed for creating economic ‘doom loop’ that fails to recognise negative impact of spending cutsThe failure of successive Conservative governments to recognise the negative impact of public spending cuts on the wider economy has meant Britain missed out on £400bn of growth since 2010, according to a report by the Trades Union Congress.An extension of austerity measures and wage restraint until 2027 under the government’s latest budget proposals would almost double the amount of lost income to £900bn, the TUC said. Continue reading...

Differing experts have urged the Monetary Policy Committee to both cut interest rates and to raise themTurn up. Take the temperature of the economy. Raise interest rates. That’s the been the pattern from the responsible technocrats at the Bank of England for more than a year now – and they show no sign of stopping.Between the depths of the global financial crisis in March 2009 and the start of the Covid-19 pandemic, interest rates were changed only five times, and three of those were in response to unexpected shocks: one after the Brexit vote in 2016, and two at the arrival of the pandemic in 2020. There was one period of more than seven years when interest rates were pegged at 0.5%. Continue reading...

It’s been three years since the UK officially left the EU. This week the IMF has predicted we will be the only major global economy to shrink this year. Plus opinion polls suggest people are regretting their vote. The Guardian’s John Harris is joined by columnist Rafael Behr, Brexit correspondent Lisa O’Carroll and economics editor Larry Elliott to look at what Brexit has delivered Continue reading...

Quarter-point increase to a range of 4.5% to 4.75% signals a slowdown in Fed’s fight against soaring inflationThe US Federal Reserve signaled a slowdown in its fight against soaring inflation on Wednesday, announcing its smallest hike in interest rates in almost a year.After its latest meeting, the Fed announced a quarter-point increase in its benchmark interest rate to a range of 4.5% to 4.75%, the smallest increase since March last year. “Inflation has eased somewhat but remains elevated,” the Fed said in a statement adding that “ongoing increases” will be appropriate as it seeks to bring prices down. Continue reading...

Economics affects us all, yet is too often treated as an abstract field fenced in by impenetrable rulesThe statistical football of this week was lobbed all the way from Washington. From its US headquarters, the International Monetary Fund predicted the UK would be the worst-performing major economy of the year, and the only one to plunge into recession. The news dominated BBC coverage and Westminster debate for the morning, a useful stick both to poke the chancellor, Jeremy Hunt, and to gauge the bleakness of the outlook.But why? Why a mere prediction, rather than an actual economic fact? Why the IMF’s forecast, when it is usually wrong and there are already plenty of other projections that are, in fact, even more pessimistic? Most important of all, why fixate on GDP when the statistic bears no direct relation to most people’s daily lives, and a recent study funded by the Office for National Statistics showed that more than half of Britons don’t even know what the term means? Continue reading...

The global economy is hardly booming, but the country is at the bottom of the pile of developed nations for two clear reasonsThe International Monetary Fund could hardly have made it clearer this week. The chronic British disease, the underlying one that marks out the UK from the developed world crowd, is our low economic growth.The IMF’s revised forecasts for 2023 certainly make stark reading for Rishi Sunak. Last week, at a cabinet awayday at Chequers, Sunak told colleagues they would be judged on five issues at the next election, of which one would be their success in expanding the economy. Yet just a few days later, the IMF revised its UK growth forecast down from the very modest 0.3% increase it posted three months ago to a 0.6% contraction.Martin Kettle is a Guardian columnist Continue reading...

The rich used to pay taxes. Now they loan money to the US government – at a profit that everyone else pays forThe dire warnings of fiscal hawks are once again darkening the skies of official Washington.They’re demanding that the $31.4tn federal debt be reduced and government spending curtailed – thereby giving cover to Republican efforts to hold America hostage by refusing to raise the debt ceiling.Robert Reich, a former US secretary of labor, is professor of public policy at the University of California, Berkeley, and the author of Saving Capitalism: For the Many, Not the Few and The Common Good. His new book, The System: Who Rigged It, How We Fix It, is out now. He is a Guardian US columnist. His newsletter is at robertreich.substack.com Continue reading...

University leaders fear billions being lost as a result of battles within government over immigration policyVice-chancellors fear billions of pounds could be lost because of new restrictions on international students, the result of internal government battles over immigration policy.University leaders have been briefed that No 10 may side with the Home Office in supporting restrictions on international students applying to UK universities that could amount to “an act of economic self-harm”, despite strong opposition from ministers and officials from various departments. Continue reading...

Average cost of home now 3.2% below August 2022 peak as mortgage demand slumpsHouse prices in the UK continued to fall in January, sliding for the fifth month in a row, according to Nationwide, pushing the average cost of a home 3.2% below the peak seen last August.The cost of a home dropped by 0.6% in the first month of the year compared with December 2022, according to the building society’s monthly survey. Continue reading...

The chancellor says that Britain needs us oldies back in employment, but the discrimination we face is an outrageThe chancellor, Jeremy Hunt, a youngster of 56, is concerned that there are about 300,000 fewer people in employment than pre-pandemic, and has urged us oldies to get back into the workplace. He declared last week that “Britain needs you”. However, at the same time, a survey of more than 1,000 UK managers in business and the public services found that only 42% of them were open to a large extent to hiring people aged 50 to 64.To this I say, 64? That’s young. I was 69 when I took my current job as college president of Murray Edwards College, Cambridge University. And, if I may say so, I think I do it very well – not despite the fact that I am old, but because of my age. I’ve got vast experience of managing organisations. I am older than nearly everyone I work with at Cambridge. I enjoy saying to all these awfully clever people: “Speaking with the wisdom of age …”Dorothy Byrne is president of Murray Edwards College, Cambridge, and the former head of news and current affairs at Channel 4 Continue reading...

Tougher rules have boosted employment but jobs offer scant career progression and contribute little to tax revenueTougher benefit rules have boosted employment in the UK in the past 25 years but only at the expense of trapping workers in dead-end jobs, according to a leading thinktank.The Institute for Fiscal Studies (IFS) said successive waves of welfare changes since the late 1990s had imposed more stringent conditions on those claiming jobless benefits and increased the incentives to find a job. Continue reading...

Milk, eggs and dog food were grocery items with fastest price rises, figures from Kantar showBritain’s retailers have said shop price inflation has yet to peak this year, with the cost of basic essentials expected to remain high, after figures showed grocery prices accelerating at the fastest rate on record.The British Retail Consortium said the price of food and drink, clothing and other items sold in shops and online would continue to rise at a rapid pace, even if the UK’s official inflation rate for all goods and services fades over the coming months. Continue reading...

Conservative Growth Group rises out of ashes of shortest-serving PM’s tenure, but Truss herself is keeping a low profile publiclyPolitical rehabilitation is a gruelling exercise: no more so than for Liz Truss, who was consigned to the history books as Britain’s shortest-serving prime minister having shattered the Conservatives’ mantel for careful stewardship of the economy.But she is persisting, once again stalking the corridors of Westminster and keen to ensure her fiery campaign to “go for growth” does not tank like the markets did in response to the mini-budget last September. Continue reading...

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Tim Worstall is willing to bet a substantial sum that a quarter of the Guardian readership is part of the global 1% by wealthNesrine Malik tells us the system is rigged in favour of the 1% by wealth (Opinion, 23 January). Entry into the global 1%, by the definition used by Oxfam, requires $1m in assets. As the Office for National Statistics tells us, that’s around the 75th percentile of British households by wealth. In other words, 25% of British households are in the top 1% of the global wealth distribution. I’d be willing to bet a substantial sum that 25% of the Guardian’s readership is too. As Pogo said in Walt Kelly’s strip cartoon for Earth Day in 1971: “We have met the enemy and he is us.”

Factors behind IMF’s latest forecast which shows UK will be only large economy to contract this yearThe International Monetary Fund has warned that Britain is expected to be the only large industrialised country to face a shrinking economy this year.The Washington-based fund upgraded its forecast for most leading economies but said it expected the UK economy to contract by 0.6% this year – a level 0.9 percentage points worse than that which it had pencilled in just three months ago, and slower even than that for sanctions-hit Russia. Continue reading...

Britain is the only G7 economy forecast to shrink in 2023, the IMF says, as higher energy prices, rising mortgage costs and increased taxes hit growth.

Too many journalists don’t get ‘basic economics’, an internal review says. Imagine the effect that’s had on UK politicsHow different might the last decade of British politics have been if the public had been better informed about economics? It’s the inescapable thought I had when reading through the BBC’s newly published “thematic review” into its coverage of “taxation, public spending, government borrowing and debt output”.Would a public not spoon-fed mush about the supposed perils of government borrowing have been so ready to accept David Cameron and George Osborne’s austerity in the early 2010s? Would Labour’s then leadership have felt so compelled to support spending cuts – a position that helped lay the ground for Jeremy Corbyn’s anti-austerity leadership bid? Might the Brexit vote have gone differently?James Meadway is director of the Progressive Economy Forum Continue reading...

Figures for England and Wales likely to worsen as UK goes into recession, say analystsBusiness insolvencies jumped 30% to a 13-year high in 2022 as government support programmes that offered companies protection from their creditors during the pandemic came to an end.Soaring costs and weakening consumer demand in the second half of last year also combined to force many firms into liquidation, said analysts who predicted the situation was likely to worsen as the UK economy moves into recession this year. Continue reading...

Bank of England figures also reveal many households are dipping into savings, rather than using credit cardsDemand for mortgages has collapsed to its lowest level since the depths of the 2020 lockdown as potential homebuyers are deterred by rising interest rates, the latest official figures show.The Bank of England said the number of home loan approvals had dropped to 35,600 in December from 46,200 in November – the fourth monthly fall in a row. Continue reading...

Paul Johnson responds to IMF warning that UK will be weakest major G7 economy this year

Advocates say such a coin would be one option to bypass the debt ceiling, but others believe the measure would not be legally soundPicture this: debate over the debt ceiling is in the 11th hour and the US is almost reaching default.Members of Congress are hurrying around the US Capitol, holding press conferences and getting into arguments. As Republicans and Democrats rail against each other, an unlikely savior appears. A platinum coin is minted as a machine stamps it with “One Trillion Dollars”, which is then given to the US central bank. Continue reading...

IMF says UK economy is likely to contract 0.6% as rising interest rates and higher taxes take tollBritain is expected to be the only major industrialised country to see its economy shrink this year after the impact of Liz Truss’s brief premiership prompted a sharp growth downgrade from the International Monetary Fund.Adding to growing political pressure on Rishi Sunak after the sacking of the Conservative party chair Nadhim Zahawi, the Washington-based IMF warned on Tuesday it expected the UK economy to contract by 0.6% this year – 0.9 percentage points worse than it had pencilled in just three months ago and slower even than sanctions-hit Russia. Continue reading...

German GDP shrank by 0.2% in Q4 2022, worse than expected, as investors anticipate borrowing costs to be hiked again this week

New research estimates that staff spend an average of one day a week dealing with problems. But as our readers tell us, some companies find a way to go the extra mileSince the Covid lockdowns, many companies have scaled down customer service, extending deadlines for complaint resolution and reducing staff. Some have removed helplines, leaving customers reliant on ineffectual chatbots.As a result, traders are taking record amounts of time to resolve issues, and taking record hits to their profits and reputation.I ordered a dress from fashion brand Nancy Mac. It was beautifully made but, sadly, not right on me. I emailed the company to ask its advice. It sent me two more dresses in different sizes and lengths to see if they would be more suitable. It also offered to make a dress in a preferred length at no extra cost, and the owner telephoned me to check I was happy with their garments. The returns were free. I have rarely come across such excellent and personal customer service.

Policymakers face balancing act between driving inflation down and risk of deepening economic slumpThe Bank of England is poised to raise interest rates for the 10th time in succession when its policymakers meet this week in a further squeeze on the finances of mortgage holders and businesses.Financial markets expect a 0.5 percentage point increase in the central bank’s base rate to 4%, its highest level since the 2008 financial crisis. It comes after nine straight rate increases from the Bank’s monetary policy committee (MPC) since December 2021. Continue reading...

Rise in share income particularly steep for investors in banks and oil companiesThe regular dividends that investors receive from owning shares in UK-listed companies soared by 16.5% in 2022, far outstripping wage growth in either the private or public sector.Investors’ returns from underlying dividends – excluding volatile one-off payouts – reached £84.8bn during the year, partly owing to a £3.8bn boost from the weakness of the pound, which inflated the figures for dividends paid in dollars. Continue reading...