Global lender says funds will help country meet urgent spending needs caused by Russian invasion

Rolling coverage of the latest economic and financial news

Response to warning over impact of Ukraine-Russia war piles pressure on UK chancellor to follow suit

From a glitzy ‘debt gala’ to a considerations about whether stealing is in fact ‘a radical act of commoning’, artist Rachael Clerke’s Transactionland aims to lift the lid on economicsIt’s unusual to find a shop that encourages shoplifting. In Bristol, a new store goes further, providing an outfit for the purpose that includes a coat with extra inside pockets and a scarf with pouches for penny sweets.Rachael Clerke would not survive long as a real shopkeeper. But as the artist behind Transactionland, an experimental series of events at a Bristol community centre, she is more interested in sparking debate than turning a profit.Transactionland is at St Anne’s House, Bristol, until 20 March. Continue reading...

Households already feeling pain from surging inflation and high energy and fuel bills set to be hit hard

Exodus of big British companies continues as bosses forced to examine their companies’ links to Russia

Centre for Economics and Business Research halves growth forecast and says inflation expected to remain at 7% until 2023The shockwaves from the Russian invasion of Ukraine will cut UK living standards by £2,500 per household, lead to more persistent inflationary pressure and slow the economy to a standstill next year, economists fear.Following reports of an escalation of the west’s economic measures against the Kremlin, forecasters have cut their estimates of growth in 2022 and 2023 and become gloomier about the outlook for the cost of living. Continue reading...

Japanese measures including turning down the heating and slower trains could ease pressure on British households, say experts

Calls for boycott include other big western food and drink companies such as PepsiCo, KFC, Starbucks and Burger KingMcDonald’s, Coca-Cola, PepsiCo and other major western food and drink companies are under mounting pressure to pull out of Russia after its invasion of Ukraine, amid calls for consumer boycotts of the brands.The companies have been criticised for their failure to speak out about the invasion, and for continuing to operate in Russia, while a host of other firms such as Netflix, Levi’s, Burberry and Ikea have halted business in the country. Continue reading...

The economic consequences of the war will not be confined to the countries fighting it. We must start developing their recovery plansRussia’s invasion of Ukraine, and the sweeping sanctions the US and Europe have imposed on Russia in response, have triggered economic disruptions at four levels: direct, blowback, spillover, and systemic. To contain their longer-term consequences, we must start working on recovery plans now.Needless to say, the Ukrainian and Russian economies are being hit the hardest. Economic activity in Ukraine is likely to contract by well over a third this year, aggravating the rapidly escalating humanitarian crisis. Already, the war has led to more than 750 civilian casualties and driven 1.5 million Ukrainians to flee to neighbouring countries, with millions more on the move internally. Continue reading...

Resolution Foundation warns record-high energy prices amid Ukraine war could lead to hit worth £1,000 per householdUK household incomes are on course to collapse by the most since the mid-1970s after Russia’s invasion of Ukraine sent energy prices soaring to new highs, a thinktank has said.The Resolution Foundation said the dramatic increase in global oil and gas prices was forecast to push UK inflation above 8% this spring, causing average incomes across Britain to fall by 4% in the coming financial year – a hit worth £1,000 per household, the biggest annual decline since 1975. Continue reading...

Gas and oil hit record highs before stabilising as countries dependent on Russian imports say measures likely to be introduced ‘step by step’Gas prices and petrol hit an all-time high and oil neared record levels on Monday after the US said it had discussed the prospect of an embargo on exports from Russia, before pushback from Germany eased the market tension.The price of gas for delivery in the UK in April soared to 800p per therm at one point, up from 460p on Friday and 20 times the price of the same contract a year ago, before the autumn energy price crunch and war in Ukraine hit. Continue reading...

Rolling coverage of the latest economic and financial news

How can we expect the Tory party to wean Britain off Russian wealth and power, when they got us hooked in the first place?In some of London’s most exclusive neighbourhoods, you can suddenly sense the kind of unease that wealth usually keeps at bay. As the government talks up its determination to crack down on Russian oligarchs, a much wider shift may be afoot. On Friday the Financial Times quoted the chair of Aylesford International, a Chelsea estate agent whose current offerings include a four-bedroom apartment in Cadogan Square, SW3, going for the best part of £12m. “The severity of these sanctions is the beginning of a new world, a new market,” he said. “I don’t think you can hide any more.”On Monday, the House of Commons will debate the government’s economic crime (transparency and enforcement) bill – first drafted four years ago, since subjected to serial delays, but now finally revived thanks to Vladimir Putin’s invasion of Ukraine. Ministers say they want to tackle the tangle of secrecy and deception that has long surrounded money stripped out of overseas economies and poured into British property, assets and banks, and thereby smooth the way for even harsher action against people linked to the Russian government. Whether this will do anything to halt the current killing and chaos is rather more doubtful than some people are making out, but Boris Johnson insists the bill will “continue to tighten the noose around Putin’s regime”. Continue reading...

Impact of US card giants’ move diluted after local Mir payment system clarifies ban only affects foreign transactionsConsumers will still be able to use Mastercard and Visa-branded cards for domestic transactions in Russia, the country’s state-backed payments network has said, reducing the impact of the US firms’ decision to pull services over the invasion of Ukraine.Russia’s homegrown payments system Mir said the cardholders would still be able to access their funds, make withdrawals and domestic transfers – at least until their bank cards expire. Continue reading...

Sanctions will take time and ‘Ukraine fatigue’ could blunt west’s resolve as cost of living crisis deepens

Tory MPs and business groups urge chancellor to scrap increase intended to fund NHS and social care amid fears of stagflationChancellor Rishi Sunak is under renewed pressure from MPs and business groups to rethink plans to increase national insurance next month, as fears grow that Russia’s invasion of Ukraine will dramatically worsen the cost of living crisis and plunge the economy into “stagflation”.Both Tory and Labour MPs believe Sunak can still be persuaded to ditch the 1.25 percentage point rise – announced last September to fund the NHS and social care – and want him to use the potentially devastating effects of events in Ukraine on prices as justification for what they say is an urgently needed U-turn. Continue reading...

The war in Ukraine has united the EU, and exposed the geopolitical folly of leaving as well as the economic lossBrexit was always going to be a geopolitical and economic disaster – a once-proud nation cutting off its nose to spite its face. The daily tragedy of Putin’s laying waste of Ukraine has highlighted the shortsightedness of Johnson’s geopolitical misjudgment in leaving the European Union.As that great one-nation Tory Remainer Michael Heseltine says: “Our continent faces a threat as severe as anything since the end of the cold war. I am ashamed that the country that in my lifetime saved European democracy has now absented itself, and that others must now determine Europe’s response.” Continue reading...

Threadneedle Street is offloading debt, but the Ukraine situation poses a new dilemma for all central banksIn times of global crisis, central banks watch for signs of panic in the financial markets. On 3 March 2020, when it became clear to investors that Covid-19 posed a significant threat to the global economy, a sudden flight to safety threatened to turn into a full-scale stampede.With sellers dramatically outnumbering buyers, central banks found themselves riding to the rescue. Continue reading...

Elvira Nabiullina, noted for her symbolic outfits, wore funereal black when announcing the economic response to sanctionsElvira Nabiullina could barely hide her unease. The governor of the central bank of Russia – famed for sending coded messages with her attire – had chosen to dress in funereal black as she warned about the devastating hit to the Russian economy from sweeping sanctions imposed by western governments in retaliation for the invasion of Ukraine.With the rouble plunging by more than a quarter and queues forming for foreign currency, Nabiullina announced last Monday that the central bank’s key interest rate would more than double to a record 20%, to curb soaring inflation. In steps to cushion the blow for ordinary Russians, capital controls would be put in place, while the stock market would temporarily close. Continue reading...

Moscow stock exchange remained closed during the week, while the rouble fell to record lowsThe London stock market has suffered its biggest weekly losses since the start of the global pandemic in March 2020, as investors took fright at the escalation of the conflict in Ukraine.Shares plunged in the City following news of a fire and Russian capture of Ukraine’s Zaporizhzhia nuclear power station, with the one-day drop of more than 250 points in the FTSE 100 index taking the weekly loss to 6.7%. Continue reading...

Economists say that the pressure for higher wages appeared to be subsiding and labor shortages easingEmployers added 678,000 jobs to the US workforce in February and the unemployment rate edged down to 3.8%, as the impact of the Omicron coronavirus variant eased, workers began returning to offices en masse, and demand for services increased.Confounding expectations that the variant would dull workforce gains, the jobs data beat most economists’ forecasts by 240,000, with the total jobs added being 200,000 higher than the January figure. Continue reading...

Inflation, tax rises and the war in Ukraine expected to slow recovery from pandemicBritain’s economic growth will halve this year as a result of soaring inflation, hefty tax rises and the destabilising shock from the war in Ukraine, a leading business lobby group has warned.In the first major forecast of the UK economy since the Russian invasion of Ukraine, the British Chambers of Commerce (BCC) said it expected an inflation rate of 8% to cut disposable incomes in 2022, putting the brakes on the recovery from the pandemic. Continue reading...

Russia’s attack reminds western nations that they must leave sufficient finances to guard against external aggression

Analysis: how long the price stays high is key, as are interest rate decisions central banks make

Review of G20 fiscal stimulus spending counters many countries’ pledges to ‘build back better’Only about 6% of pandemic recovery spending has been “green”, an analysis of the $14tn that G20 countries have poured into economic stimulus.Additionally, about 3% of the record amounts governments around the world have spent to rescue the global economy from the Covid-19 pandemic has been spent on activities that will increase carbon emissions, such as subsidies to coal, and will do little to reduce greenhouse gases or shift the world to a low-carbon footing. Continue reading...

Fuel prices are soaring across America as the Ukraine crisis bites – bad news for those trying to stay warm in their carsFor the past five months Anna Hokuf has lived in her car with her cat after she left an abusive home environment. Trying to save enough money to secure an apartment doing odd jobs while homeless has been hard enough for the 19-year-old. Now rising gas prices have made it all but impossible.“I don’t have the ability to save much money and gas prices being as high as they are at almost $4 a gallon really makes being homeless tough,” said Hokuf, of the Lehigh Valley, Pennsylvania, area. “I have to keep my car on all the time to stay warm and to keep my cat warm, which wastes more gas and has caused a strain on my car.” Continue reading...

Bank’s European subsidiaries faced ‘abnormal cash outflows’, so it could no longer supply them with liquidity

President acknowledges ‘too many families are struggling’ as climbing prices hit him in pollsGetting runaway prices in America under control is “my top priority” Joe Biden told Congress on Tuesday in his first State of the Union address.Soaring inflation – now at a 40-year high – has hurt Biden in the polls and the US president bluntly acknowledged “too many families are struggling to keep up with the bills. Inflation is robbing them of the gains they might otherwise feel”. Continue reading...

Analysis: Economic penalties have been meted out since Napoleon’s day but there’s little proof they achieve the desired outcomeWaging war by economic means is nothing new. Napoleon imposed an ineffective embargo on British exports in the early 19th century and during the first world war there were attempts by both sides to starve each other into submission.But since 1945 sanctions have been used with increasing frequency as a means of trying to change either the policy stance or the regimes in targeted countries. Continue reading...

The invasion of Ukraine has led many British companies to consider disinvestment – with encouragement from the governmentRussia is “uninvestable for the foreseeable future”, said Stephen Bird, chief executive of Abrdn, a statement of the obvious for a fund management group. If BP and Shell can ditch long-held investments and partnerships, Abrdn can certainly wave goodbye to the 0.5% of its assets that it currently holds in Russia. The money is the customers’ anyway.The moral clarity around the moves by BP and Shell owed much, of course, to the fact that the duo were in bed in state-backed energy companies that are arms of the Kremlin – Rosneft and Gazprom, respectively. Continue reading...

Debt charities expect borrowing levels to rise more sharply in spring as cost of living crisis bitesBorrowing on credit cards and short-term loans slowed in January to its lowest growth rate since September 2021 as the Omicron variant discouraged consumers from venturing out to shops, restaurants and bars.Data from the Bank of England showed a net increase of £600m in consumer credit lending in January, a drop from an increase in December of £800m and £1.2bn in November. Continue reading...

Business secretary Kwasi Kwarteng says firms are joining in push to isolate Moscow

Food prices in the US are up 7.5% overall and gas and housing prices in many areas have soared. How are you coping?Inflation in the US reached its highest level in 40 years in January, with prices rising 7.5% from a year ago, according to the Bureau of Labor Statistics.Price rises for food, electricity and shelter were the largest contributors to the increase, which has been driven by soaring demand and a lack of supply caused by Covid-19’s global impact on trade. Continue reading...

MoneySavingExpert’s Martin Lewis says deal is a ‘corker’ as prices are likely to rise later this yearAn energy tariff offering fixed prices for a year has sold out within hours of being publicised, after consumers rushed to try to protect themselves from the effects of the war in Ukraine on household bills.E.on’s Next Online V11 tariff promised prices fixed for a year, set at the same level as Ofgem’s new capped rate. Continue reading...

Mirror and Express owner expects ‘modest’ drop in operating profits this year due to inflation and soaring costsThe value of the publisher of the Daily Mirror and Daily Express newspapers plunged by a quarter on Tuesday after it warned that inflationary pressure and soaring newsprint costs would hit profits this year.The London-listed publisher Reach, which also owns 200 regional print and digital titles, including the Manchester Evening News and Liverpool Echo, warned that it expects to see a “modest” drop in operating profits this year. Continue reading...

Food price inflation climbed to 4.3% in February as Ukraine conflict deepened cost-of-living crisisGrocery prices rose at their fastest rate in more than eight years in February, according to the market analysts Kantar, which predicted the squeeze on shoppers would continue as a result of supply-chain disruption and the conflict in Ukraine.Food price inflation hit 4.3% last month, the highest since September 2013, as the price of savoury snacks, fresh beef and cat food increased the fastest. However the cost of some products, including bacon, beer, and spirits fell. Continue reading...

Debate rages over whether Russian banks could use crypto such as bitcoin as an alternative currency exchange

The inventor of the Brics acronym says sanctions against Russia have exposed nations’ dependence on the western economic system

Rising global stock markets and increased property prices swelled ranks of ultra-high net worth individuals, according to new reportMore than 51,000 people joined the ranks of the “ultra-wealthy” last year as the fortunes of the already very rich benefited from rising global stock markets and increased property prices during the pandemic.The number of ultra-high net worth individuals (UHNWIs) – those with assets of more than $30m (£22.4m) – rose by a record 9.3% last year to 610,569, according to a report by the property consultants Knight Frank. Continue reading...

As Ukraine crisis drives energy prices up, firms say tax rise could put Covid recovery at riskRishi Sunak is facing renewed pressure from business leaders to delay a planned £12bn rise in national insurance, amid warnings over soaring costs for companies and households as the Russian invasion of Ukraine drives up inflation.The manufacturing trade body Make UK, which represents 20,000 firms of all sizes across the country, said the tax hike planned for April should be pushed back until the UK economy is in a stronger position. It warned the government that pressing ahead would risk firms slamming the brakes on recruitment and putting the economic recovery from Covid at risk. Continue reading...

Government claims it will boost bilateral trade by 60% but critics call its benefits ‘economically marginal’Britain and New Zealand have signed a free trade deal, which the UK government said would boost bilateral trade by 60% by eliminating tariffs, cutting red tape and enabling freer movement of professional workers.Most business leaders welcomed the deal, which was agreed in principle in October and follows on the heels of a similar agreement with Australia, but the National Farmers’ Union (NFU) said it would lead to unfair competition in their sector. Continue reading...

With growing queues at cash machines across country, Russian economy faces growing fallout from international sanctions

Analysis: Images of war, US and UK allies and Volodymyr Zelenskiy have all helped create a new political necessity

We look at different economic measures deployed around world to counter aggression from Putin

Russian currency expected to plunge in first day’s trading since Swift ban and ECB says state-owned Sberbank subsidiaries are set to collapse

Inflation and higher energy bills could lead to sharpest fall in UK living standards since 1956These are challenging times. The reconstruction job from Covid-19 had barely begun when Russia invaded Ukraine. Now the international consensus to build back better from the pandemic has been replaced by an urgent need to prevent the conflict from escalating.With such high stakes, economic sanctions, not bombs, are the western weapon of choice, limiting Vladimir Putin’s ability to muster guns and butter. But while there will be harsher consequences for Russia, made a pariah under the Putin regime, it is a battle not without economic collateral damage. European leaders will this week announce a strategy to cut Europe’s reliance on Russian energy – a plan in the works before the first tank rolled into Ukraine, now given added urgency. With Russia accounting for 40% of EU gas imports – rising to 65% in Germany and 100% for some eastern European states – it is a prudent move. Yet it is a process likely to take years. In the meantime, the shock of war will drive up energy prices across the continent – adding to what was already the worst squeeze on living standards in decades. Continue reading...

Press secretary promises ‘optimism’ in face of war and inflation despite worrying Post-ABC poll two days before State of the Union

Biden’s green energy plan could be derailed since Russia mines and produces a significant amount of key metals“I will not pretend this will be painless,” Joe Biden warned Americans before Russia’s invasion of Ukraine. And as the war disrupts already hard-hit international trade, US consumers are likely to soon see just how painful the consequences of the conflict will be in the US.Inflation is already at a 40-year high in the US and, depending on the length and depth of Russia’s war, any further disruption could cause prices to rise at the pump and perhaps on store shelves. Continue reading...

The attitudes of the first fund chief to come from a former communist country were shaped by her early life, but her focus is now on a greener post-Covid futureAnyone in charge of the International Monetary Fund would be concerned about what is happening in Ukraine, but Kristalina Georgieva has a personal reason for being anxious about events in eastern Europe. In London, two days before Vladimir Putin launched his invasion, the IMF’s managing director tells the Observer she has a family connection to the north-eastern city of Kharkiv – an early target for Russian air strikes.“My brother married a Ukrainian and he and his wife went there to look after her mother,” says the Bulgarian-born economist. “They stayed because they didn’t want to leave her in a time of uncertainty. I speak to him every day.” Continue reading...