Turkey’s president to hike minimum wage by 50% with other measures to come in attempt to stabilise currencyTurkey’s president, Recep Tayyip Erdoğan, has vowed to take on the currency markets after a fresh cut in his country’s interest rates sent the lira plunging to its lowest ever level against the US dollar.Erdoğan said Turkey’s destiny would not be determined by the level of borrowing costs or by foreign exchange speculators despite signs his unorthodox approach to running the economy was leading to rapidly rising inflation. Continue reading...

Rolling coverage of the latest economic and financial news

Flash estimate of activity since Covid variant’s arrival reveals a marked impact on service sector

Analysis: on this occasion the MPC has decided the threat of inflation becoming embedded is greater than the risk to growthThe Bank of England is making a habit of pulling surprises. In November, financial markets were taken aback when Threadneedle Street kept interest rates on hold at 0.1%. This time they were caught on the hop by the decision to raise them to 0.25%.It’s not hard to see why traders in the City have been left scratching their heads given that the explanation for doing nothing in November – uncertainty about the real state of the economy – seems to apply just as much to today’s circumstances. Continue reading...

The lowdown on how the Bank of England decision will affect borrowers and saversThe Bank of England has increased interest rates to 0.25% from the historical low of 0.1% in an attempt to tackle rising inflation in the UK, but what does that mean for the public? Continue reading...

Inflation spike prompts MPC to vote for increase despite fears for UK economy from surge in Omicron casesThe Bank of England has unexpectedly raised interest rates for the first time in three years amid growing concerns over inflation, despite the rapid spread of the coronavirus Omicron variant.Threadneedle Street’s monetary policy committee (MPC) voted by a majority of eight to one to raise rates from the historic low of 0.1% to 0.25%, judging that pressure on households from surging living costs outweighed the risks to the economy from the new variant. Continue reading...

Shares plunge as ‘exceptionally high’ rate of customer returns linked to renewed popularity of dresses dents salesThe fast fashion group Boohoo has warned that full-year profits and sales will be lower than expected after being hit by more customers returning clothes, delivery disruptions and surging costs.Shares in the online clothing retailer plunged 15% in response to its second warning in four months, despite its insistence that the current difficulties facing the business were mostly related to the pandemic and therefore “transient in nature”. Continue reading...

Colourful kokina heralds the holiday season – and a financial lifeline for those facing runaway inflation and discriminationWhen flower vendors put out the red and green kokina on the streets, holiday season has arrived in Istanbul.Widely believed to have begun as a Christmas tradition of Turkey’s Greek community, kokina is made by tying together two different plants that grow in the wild, and looks like a picture-perfect version of holly. Its name comes from the Greek for red. Continue reading...

Central bank will double rate at which it cuts spending on government bonds and expects to raise borrowing costs next yearThe US Federal Reserve has announced that it will accelerate an end to the central bank’s pandemic-era support of the US economy in a major shift that will also see a series of interest rate rises next year.The measures are a signal that US central bankers no longer view rising inflation as a “transitory” nuisance caused by supply chain problems meeting pent-up consumer demand, but an issue that now requires firm management to avert lasting damage to the US economy. Continue reading...

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NIESR’s management offered an increase worth 2% while latest data shows cost of living is up 5.1%Asking workers to stomach a below-inflation pay rise is never popular. Asking them to do so when their day job is forecasting the cost of living is really asking for trouble.And so it has proved at the National Institute for Economic and Social Research. A strike ballot opened on Wednesday for members of the Unite union after the NIESR’s management offered a basic pay deal worth 2%. It comes after wages were frozen last year. Continue reading...

Analysis: Bank of England faces tough call as apple prices rise by 25% and Omicron cases increase

As inflation rises to its highest rate in a decade, we look at the implications for consumers, savers and interest rates

Increase to 5.1% in November puts further pressure on Bank of England to raise interest rates

House prices, sales and construction all fell in November as Shimao Group shares plunge and Beijing assesses what to do with EvergrandeChina’s giant housing market has continued to decline in the past month and another major developer showed signs of financial distress as state-owned enterprises began carving up the carcass of the failing property giant Evergrande.House prices, sales, investment and construction data released on Wednesday all showed renewed signs of the crisis in the market, which accounts up to 30% of the country’s output and which appears certain to drag on the world’s second biggest economy. Continue reading...

People investing in the cryptocurrency should be aware of risks, central bank saysThe Bank of England has said that bitcoin could be “worthless” and people investing in the digital currency should be prepared to lose everything.In a warning over the potential risks for investors, the central bank questioned whether there was any inherent worth in the most prominent digital currency, which has soared in value this year to close to $50,000 (£37,786) a piece. Continue reading...

Rolling coverage of the latest economic and financial news

Exclusive: Chancellor said to not have opposed jab regime but warned of spending cuts or tax rises to pay for it

Economic body says Britain has dealt well with Covid-19 but new variant poses a new threatThe chancellor, Rishi Sunak, should be drawing up contingency plans for a mini-furlough in the event that the Omicron variant forces the government into closing parts of the economy, the International Monetary Fund has said.In its annual health check of the UK, the IMF warned the fast-spreading mutation of the Covid-19 virus posed a fresh threat to the economy after what had been a “challenging year”. Continue reading...

Jobless rate falls to 4.2% as number of workers on company payolls rises by 257,000Unemployment in the UK fell in October despite the end of the furlough scheme, according to official figures, as companies continued to hire amid record numbers of staff vacancies.The Office for National Statistics said the unemployment rate fell to 4.2% in the three months to the end of October, representing about 1.4 million people, down from 4.3% in the three months to the end of September. Continue reading...

Bank wants to scrap rule that borrowers must be able to afford rate rise of three percentage pointsThe Bank of England has announced plans to ease mortgage lending rules in a move that could help thousands of first-time buyers get on to the property ladder.The central bank said it wanted to remove a requirement that forces borrowers to be able to afford a three-percentage-point rise in interest rates before they can be approved for a home loan. Continue reading...

Rolling coverage of the latest economic and financial news

Paul Volcker’s shock therapy in the 80s hollowed out American manufacturing and permanently boosted both Beijing and Wall StreetDown the ages there has been no shortage of central bankers intent on squeezing inflation out of the system, but Paul Volcker is in a class of his own.Appointed by Jimmy Carter in 1979 when the US annual inflation rate was well into double digits, Volcker administered brutal shock treatment to the world’s biggest economy, at one point pushing official interest rates above 20%. Fans of the 6ft 7in (2.04m) chairman of the Federal Reserve continue to be in awe of his single-minded approach to price stability. Volcker is the inflation hawks’ hawk. Continue reading...

Voters can spring surprises at any time. This is not a time for Remainers to despair. It is never time for thatDuring the closing stages of Margaret Thatcher’s premiership, I said to the Conservative MP John Biffen: “I think Mrs Thatcher must be suffering.”This was surprising, coming from such a long-term critic of Thatcherism as myself, but so was the reply from Biffen, a former member of her cabinet and also, for years, her leader of the Commons. “Yes,” he replied, “but is she suffering enough?” Continue reading...

Despite new restrictions, some experts say rising inflation and vacancies are good reason for the Bank of England to take a lead this weekThere is a contrarian view of Britain’s economic outlook. Those who subscribe to it argue that despite fresh government restrictions to combat the Omicron variant, the recovery is robust and the Bank of England will have to raise interest rates when it meets this week.It is a minority view in the City, but it could find favour inside Threadneedle Street when members of the nine-strong monetary policy committee (MPC) gather, and bring a surprise increase in the base rate from 0.1% to 0.25%. Continue reading...

A new study on the movement suggests that its abiding legacy might be as an insultNo one admits to being a “neoliberal”. You cannot vote for the Neoliberal party or join a neoliberal club. Like 21st-century fascism and religious fundamentalism, neoliberalism is a movement without declared adherents.If you call opponents “fascist” or a “fundamentalist”, however, at least your audience knows you are condemning them. A “neoliberal” though? Most people won’t know what you are talking about, but will guess that it doesn’t sound such a bad thing to be. The exceptions will be the minority immersed in leftwing thought. They alone are primed to shudder at the sound of the word. Continue reading...

Supply chain disruptions have left many UK households waiting months extra for deliveries of sofas and tablesThe £800 Townhouse dining table is an “elegant, sturdy classic” built for gathering round. Marsha Moore’s £20 melamine camping table, with a surface area of less than a square metre, is not, and certainly not where she imagined eating Christmas dinner.But Moore, a writer who recently moved into an unfurnished flat in London with her husband and son, is one of many Britons trapped in a furniture nightmare before Christmas after deliveries of key pieces such as sofas, tables and beds were delayed by supply chain disruption. Continue reading...

Consumer prices across America have risen at their fastest annual pace in almost 40 years, driven by pricier energy, food and housing

October GDP increase of only 0.1% weaker than expected, with number of people dining out falling

For six months in a row prices increased across many sectors, including gas, food and housingThe US inflation rate rose 6.8% over the last year, the highest increase since 1982, the Bureau of Labor Statistics reported Friday morning.Inflation rose 0.8% in November after rising 0.9% in October. Price increases were seen across many sectors, including gas, food and housing. This is the sixth month in a row the US is seeing price increases. Continue reading...

Analysis: growth was weakening before Omicron emerged to put more pressure on businesses and homes

Economists don’t see a return to recession – but consumers staying at home is likely to have a big impact on some sectors

No government has openly embraced modern monetary theory, but many of the radical doctrine’s core principles are informing today’s policy decisionsToday, citizens are unwitting participants in a covert policy experiment. It embraces the idea of higher government spending without the necessity of increased taxes. While modern monetary theory (MMT), the doctrine, has obvious appeal for politicians, irrespective of economic religion, the long-term consequences may prove problematic.A state, MMT argues, finances its spending by creating money, not from taxes or borrowing. As nations cannot go bankrupt when they can print their own currency, deficits and debt don’t matter. Accordingly, governments should spend to ensure full employment, guaranteeing a job for everyone willing to work. Alternatively, though not formally part of MMT, governments can fund universal basic income (UBI) schemes, providing every individual an unconditional flat-rate payment irrespective of circumstances. Continue reading...

Rolling coverage of the latest economic and financial news

Fears of economic slowdown mean Bank of England less likely to intervene to dampen inflation

Lowe outlines ways tokens rather than dollars might circulate in Australia but is ‘sceptical’ of cryptocurrencies for general payments

Xi Jinping’s mission is not only to control the housing bubble, but rein in untethered industries and foreign capitalChina’s economy has become heavily dependent on property development over the last decade. High-rise apartments have mushroomed across hundreds of cities to house a growing white-collar workforce, while glass and steel office blocks are dominating city centres, mimicking Shanghai’s glittering skyline.Valued at more than $50tn after 20 years of rapid growth, Chinese real estate is worth twice as much as the US property market and four times China’s annual income. Continue reading...

Rolling coverage of the latest economic and financial news

Super-rich have grabbed an increasing share of the world’s income, economists’ study findsGlobal inequality is as marked as it was in the early 20th century pinnacle of western imperialism after the capture by the super-rich of an increasing share of the world’s income, a new report has shown.A study by a group of economists including Thomas Piketty and Emmanuel Saez said 30 years of the globalisation of trade and finance had widened the gap between rich and poor. Continue reading...

Beijing to increase business lending and build more affordable housing, but reports say property giant has missed a key bond repaymentChina’s politburo has signalled measures to kickstart the faltering economy as the crisis gripping the country’s debt-laden property sector continued to blight prospects for growth.President Xi Jinping’s senior leadership committee rubber-stamped a plan from the central bank on Monday for more targeted lending to businesses and outlined support for the housing market. Continue reading...

Rolling coverage of the latest economic and financial news, as the UK’s growth outlook is marred by Omicron

BoE monetary policy chief Ben Broadbent says pressures will include rise in energy price capThe Bank of England’s monetary policy chief has said inflation is likely to soar “comfortably” above 5% next spring when the energy regulator Ofgem raises a price cap affecting millions of households.Record high levels of vacancies are also likely to persist for longer than previously expected as the jobs market adjusts to changes in the economy brought on by the pandemic, said Ben Broadbent, the central bank’s deputy governor with responsibility for monetary policy. Continue reading...

Accountant KPMG is even gloomier, predicting 2.6% growth if social distancing rules are imposed

Like the government with Covid, the Bank of England faces a wait-and-see versus no-risk dilemma on interest rates

The head of ‘levelling up’ should be on a mission to direct funds to struggling areas – but No 11 is a strong adversaryMichael Gove has become the British economy’s Mr Fixit. While Rishi Sunak gives the appearance of someone who obsesses about little other than how and when to reduce the national debt, it is left to the MP for Surrey Heath to chart the government’s next steps.As the new boss of Whitehall’s most clumsily renamed department – for “levelling up”, housing and communities (DLUHC) – it is Gove and not the chancellor who appears to have the job of joining the random dots on Boris Johnson’s map to a brighter, more equal and more planet-friendly future. Continue reading...

Only after building strong industries can countries safely open up to international competition, says Richard Ross, and power imbalances are keeping people poor, writes Benny DembitzerYour editorial cites India and China as countries that opened up their economies gradually to international competition (The Guardian view on the WTO talks: poor countries can’t be kept poor, 29 November). This has been the way to development of pretty well all countries.Japan’s economic miracle after the second world war was based on protecting its economy with quotas and import tariffs, and directing investment to industries such as motor vehicles and electronics to enable them to develop, safe from competition. Only when these industries were strong were their firms permitted to enter international markets. Other Asian countries such as South Korea and Taiwan followed suit. Continue reading...

MPC member and rate rise supporter Michael Saunders says more time is needed to study economic effects of new variant

Total is less than half the growth that economists expected while unemployment rate dropped to 4.2%The US economy added 210,000 jobs in November, less than half the jobs growth that economists had expected, in a report that was compiled before the discovery of the Omicron coronavirus variant that now threatens to derail the economic recovery from the pandemic.The unemployment rate dropped to 4.2% as employers added jobs in business services, transportation, warehousing and construction. The overall gain was less than half the 500,000 plus jobs that economists had expected to be added over the month. Continue reading...

Rolling coverage of the latest economic and financial news