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...

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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

Andrew Bailey says interest rates will have to rise again unless inflation falls

Almost four in 10 people have to use credit cards to cover such costs, says NationwideInflation and rising bills mean UK households are spending 12% more on essentials than they were a year ago, with almost four in 10 people having to use credit cards to cover these costs, new data shows.Two days after it emerged that the UK’s annual inflation rate unexpectedly jumped to 10.4% in February, Nationwide said its figures showed that consumers spent 34% more on utility bills and 17% more on mortgage payments last month than they did in February 2022. Continue reading...

UK central bank sets interest rates at 14-year high after inflation jumped to 10.4% in February

The Bank of England’s move risks squeezing the economy just as inflation is expected to start fallingTasked with striking a balance between an unexpected increase in February’s inflation numbers and concerns about a new banking crisis, the Bank of England has voted for an 11th consecutive rate rise. The question now is whether they will opt for a 12th.Markets are pricing in a further small hike to 4.5%. However, a glance at the forecasts for inflation show it declining rapidly this year, mostly in response to a dramatic fall in energy costs. While wholesale gas prices are expected to be double the pre-pandemic level next year, they will have fallen back from the five-fold increase in 2022.This article was amended on 23 March 2023. A previous version incorrectly referred to the Bank of England cutting interest rates. Continue reading...

Monetary policy committee votes to increase base rate after February’s surprise rise in inflation

How the new base rate of 4.25% might affect mortgages, house prices and credit cards

Unite says their analysis shows banks have made £7bn in extra profit from the rise in borrowing costsBritain’s biggest banks are under pressure to pass on higher interest rates to savers after figures showing they have made an extra £7bn by refusing to do so, and as they stand to benefit from a tax cut announced by Jeremy Hunt.On the day the Bank of England is expected to announce a further rise in interest rates, the Unite trade union said banks had already made billions of pounds in extra profit from the dramatic rise in borrowing costs. Continue reading...

US central bankers must decide whether to push on with monetary tightening, or pause rate hikes amid banking turmoil

Fed announces rise to a range of 4.75% to 5% – its ninth consecutive rate rise and the highest rate since 2007Facing the worst banking crisis since 2008 and the highest inflation rate in a generation, the Federal Reserve chose to keep fighting price rises and announced another hike in interest rates.The US central bank announced on Wednesday that its benchmark interest rate would rise another quarter of a percentage point to a range of 4.75% to 5% – its ninth consecutive rate rise and the highest rate since 2007. A year ago interest rates were close to zero. Continue reading...

International Monetary Fund breaks ground with first such support for a country at warThe International Monetary Fund, the global lender of last resort, has agreed a package of support for Ukraine of $15.6bn (£12.8bn).The loan, the first the Washington-based lender will make to a country at war, could represent one of the biggest tranches of financial support for Ukraine so far. It still needs to be signed off by the IMF’s executive board, a process that should conclude within weeks. Continue reading...

Britain appears to be an international outlier after the shock reading in double digits this week

From low-fat milk to sugar, energy bills to clothing, how costs have soared

Increase confounds forecasts of a modest dip and adds to pressure on Bank of England to raise interest rates

With food prices increasing at their fastest rate in 45 years, we hear how one family is coping with the financial pressure

Surprise increase makes hike more likely, but economy is perilously close to recession

The ghosts of 2008 return. Plus: 20 years after the Iraq invasion

While inflation remains high, traders are now uncertain if Bank of England and US Federal Reserve will hike rates – and how muchCentral banks on both sides of the Atlantic are facing one of the toughest calls on interest rates in years, as concerns over the worst banking crisis since 2008 cast doubt on the need for further action to reduce sky-high inflation.Financial markets expect the US Federal Reserve to raise its main rate by 0.25 percentage points on Wednesday, down from predictions just two weeks ago for the US’s central bank to increase borrowing costs by twice that amount. Continue reading...

UBS’s rescue of Credit Suisse is expected to result in tens of thousands of job cuts, while bank shares are recovering today on both sides of AtlanticUK government borrowing rose last month to the highest February deficit on record, largely because of spending on support schemes to help households and businesses with spiralling energy bills.The government borrowed £16.7bn in February, £9.7bn more than a year earlier and the highest February borrowing since monthly records began 30 years ago, according to the latest figures from the Office for National Statistics. Continue reading...

US officials step in to guarantee deposits after smaller US banks have been pummeled by a wave of withdrawals, triggering crisisThe treasury secretary, Janet Yellen, pledged to protect depositors at smaller US lenders on Tuesday from “contagion” after bank runs led to customers pulling billions in funds.US officials have stepped in to guarantee the deposits of two banks that collapsed earlier this month and in a speech in Washington Yellen gave the clearest signal yet that they will step in again if the crisis continues. Continue reading...

Inflation is receding, albeit slowly, so there’s no reason to risk more financial tumult. Will the central bank see it that way?The global financial system is facing a crisis of confidence. Which makes this week’s meeting of America’s central bankers critically important.None of the 12 members of the Federal Reserve Board’s Open Market Committee were elected to their posts. The vast majority of Americans don’t even know their names, except perhaps for the chairman, Jerome Powell. Continue reading...

Deficit increases despite higher tax receipts and lower interest paymentsUK government borrowing rose last month to the highest February deficit on record, largely because of spending on support schemes to help households and businesses with spiralling energy bills.The government borrowed £16.7bn in February, £9.7bn more than a year earlier and the highest February borrowing since monthly records began 30 years ago, according to the latest figures from the Office for National Statistics. Continue reading...

FTSE 100 rises and European banking shares are up after early jitters over what UBS takeover deal means for bondholders

Troubles at Silicon Valley Bank and Credit Suisse are due partly to impact of rising interest ratesIf you’re a banker, it’s been a month to forget. Two regional US banks have gone to the wall, central banks on both sides of the Atlantic have been forced to provide hundreds of billions of dollars in emergency lending to shore up the financial system, and the Swiss financial group Credit Suisse has been ignominiously absorbed into the larger UBS at the behest of its regulator. About half a trillion dollars have been wiped from banks’ stock market valuations.Although history doesn’t repeat itself, it rhymes sufficiently to ask whether we are on the brink of another global financial crisis. A bit of context for the current troubles might help answer. Continue reading...

Misguided policies are hurting the poorest in society, writes the UN’s independent expert; our focus should be on reducing inequality not increasing GDPA new report from the Center for Global Development claims extreme poverty may be eradicated by 2050 thanks to economic growth in low-income countries. However, a cause for celebration, this is not.Before we start putting our feet up, it’s worth remembering that extreme poverty is measured according to the World Bank’s international poverty line, which is set at $2.15 (£1.80) a day per person using 2017 prices. Continue reading...

Coordinated action echoes steps taken to offset the impact of the Covid-19 pandemic in 2020 and to shore up the system after the GFC

Swiss government forces through takeover at well below market value amid fears of global banking crisis

We now know what happens when central banks raise rates and reverse QE

Exclusive: David Blanchflower urges rethink after collapse of Silicon Valley Bank and lifeline thrown to Credit SuisseThe Bank of England should slash interest rates and stop selling government bonds in the wake of the turmoil in the banking sector, a former Threadneedle Street policymaker has said.David Blanchflower, a member of the Bank’s monetary policy committee during the global financial crisis of 2008, said official borrowing costs should be cut from 4% to 3% at this week’s meeting. Continue reading...

Institute for Fiscal Studies says the point of pensions is to fund retirement, not to bequeath large sums tax freeJeremy Hunt’s budget decision to scrap the limit on pensions savings has been criticised as “bizarre” by the UK’s leading economics research institute, which says it creates an unjustified extra inheritance tax loophole for high earners that should be closed as soon as possible.The Institute for Fiscal Studies (IFS) says that following last week’s budget many people on high incomes will now be able expand their pension pots in order to pass on hundreds of thousands of pounds more to their loved ones, tax free, when they die. The IFS says the purpose of pensions savings should be to fund retirement incomes not to escape tax. Continue reading...

Jeremy Hunt says the economy is his priority; but it and he are still really in thrall to the ideological blight of BrexitA budget for growth? Sorry, pull the other one. Below the spin, even the official forecasts are laden with gloom. Funnily enough, it is 50 years since one of Jeremy Hunt’s chancellarial predecessors, Tony Barber, produced a “budget for growth” that really worked – indeed, rather too well. It resulted in the “Barber boom”, when gross domestic product rose by some 6% in real, adjusted-for-inflation, terms in one year.They don’t come like that any more, which is just as well, because the Barber boom ended in tears. (In truth it was the Heath boom, because the prime minister was really in charge.) Continue reading...

The chancellor’s spring budget is stymied by arbitrary debt targetsMore than a decade of austerity trapped Jeremy Hunt as he delivered his first budget, leaving him cornered. Allowing himself only puny resources to begin rebuilding Britain after years of underinvestment, he was left to boast about an extension of childcare funding that nursery providers quickly damned as too little to save many from going out of business.The billions of pounds the chancellor needed to redress a multitude of financial shortfalls across the public sector were absent, even though the dire economic outlook he inherited from his predecessor, Kwasi Kwarteng, had eased somewhat. To mask his impotence, the chancellor mostly ignored the crumbling state apparatus to focus on eye-catching subsidies and tax breaks for business. In addition to the childcare funding, there was extra protection from energy price rises in April and millions of pounds to prevent another wave of swimming pool closures. This tinkering could not hide the fact that he failed to prevent the average household from suffering the largest fall in incomes adjusted for inflation since records began in the 1950s. Continue reading...

Concern about trouble in finance sector, plus renewed momentum in UK economy, could halt rises City analysts thought were a certaintyIn 2006 the US central bank completed a series of interest rate rises that took its base rate from 1% to 5.25%. The plan was to cool a booming economy, but ended two years later with the great financial crash.Earlier this month, the Federal Reserve was expected to push ahead with a 0.25 percentage point rise from its current range of 4.5% to 4.75%, this time to quell inflation generated by the Covid-19 pandemic and Ukraine war. Continue reading...

The travails of Credit Suisse and others have stirred up bad memories for a public still scarred by the financial crisisNo one in the Treasury had expected March to be easy. Last Monday’s economics-heavy review of defence and foreign policy, and last Wednesday’s budget, meant that a tough week for its mandarins was already priced in. But none of them had expected to have to sell a bank for £1.That happened in the early hours of Monday, when Treasury and central bank officials eventually brokered a deal for HSBC to buy the UK arm of Silicon Valley Bank (SVB UK) for a nominal fee – following the collapse of SVB’s California parent when a disastrous investment strategy unravelled. Continue reading...