Money

This morning’s economic update from the Confederation of British Industry doesn’t make for cheery reading – but it could be worse. The organisation forecasts that the combination of high prices and low business investment will see the UK in recession throughout next year. Having previously predicted a 1 per cent rise in GDP next year, the CBI now expects a 0.4 per cent contraction. Meanwhile, the organisation’s economists expect average inflation over the course of the year to be more than three times the Bank of England’s target of 2 per cent. It’s by no means good news – but compared with other recent forecasts for the UK economy, it’s

Emmanuel Macron’s state visit to Washington this week and the upcoming meeting of the US-EU Trade and Technology Council on Monday are important tests of whether the western world can avoid a return of destructive beggar-thy-neighbour policies which already once destroyed the global trading system in the 1930s.  The most recent point of contention centres on the American Inflation Reduction Act’s provisions aimed at supporting US manufacturers of electric vehicles, to the exclusion of European ones. While at a joint press conference with his French counterpart, the US President Biden vowed to fix the ‘glitch’ in his signature piece of legislation. But doing so remains a tall order, particularly with

The US entered recession earlier than the UK and Europe, and suffered its inflation surge earlier too, so it was always likely that its economy would recover earlier. But is the US emerging from recession while Europe and the UK are still plunging into theirs? That’s what today’s data from the Bureau of Economic Analysis suggests. Real US GDP grew in the third quarter of the year by 0.3 per cent, making for an annualised rate of 2.9 per cent. The figure was negative for the first two quarters of 2022, shrinking by an annualised rate of 0.6 per cent in the second quarter. By contrast, the UK economy shrank

Andrew Bailey this afternoon showed that those who start fights don’t necessarily finish them. Speaking as the only witness at the House of Lords Economic Affairs Committee today, the Governor of the Bank of England landed some rather extraordinary accusations against Liz Truss and Kwasi Kwarteng, suggesting that he was not informed of the details in September’s mini-Budget and that he ‘does not think it was settled’ even the day before it was announced. According to Bailey, both the Monetary Policy Committee and the Treasury officials who were briefing the Bank were forced to speculate about what was coming: ‘There was speculation that this was going to be quite a

The OECD has marked Britain down as the only G7 country (and the only major country bar Russia) expected to suffer a shrinking economy next year. But how accurate are its predictions? A year ago, it predicted that inflation in the UK would peak at 4.9 per cent in the first half of this year before falling back to 2 per cent by the end of next year. The economy was going to grow by 4.7 per cent this year followed by a further 2.1 per cent in 2023. The government would bite off any hand that offered that now. It can be excused for failing to predict the Russian invasion

A year ago Boris Johnson lost his place in his speech to the CBI annual conference. He started blathering on about Peppa Pig World, after having treated young Wilfred to a day out there the day before. It was excruciating, but at least it was fun. It is hard to say the same about Rishi Sunak’s address to the CBI this morning.  The CBI ought to be a natural habitat for Sunak, yet he didn’t seem entirely comfortable. His voice seemed a tone higher than normal, so his usual enthusiasm sounded something more like a desperate appeal. He wanted us to know that innovation is a good thing which improves

What exactly happened at FTX and its sister company Alameda Research is unclear, and will be for some time. What we do know is that what’s currently unfolding is a sort of economic Jurassic Park; we are being given a brief glimpse of financial life in the 18th century, before centuries of bitter experience coalesced into the financial regulations we love to hate. It’s a common joke that cryptocurrency is gradually learning why all the boring rules and regulations of the traditional financial world exist. It’s also entirely true. The earliest explanation for the sudden crash of FTX was very simple: the exchange had become something like a bank, taking

The teenagers are once again in charge of UK fiscal policy. The teenagers are not the Chancellor and his team, but those who set the tone of the fiscal debate in the media and the financial markets. The reasons the Conservatives are now embracing austerity is the fear that higher interest rates will kill house prices. This is mad The teenage scribbler is usually a young, pro-austerity banker, with no formal education in economics or economic history. The scribbler pretends that whatever happens is happening for the first time. The scribbler was still on the playground when the previous generation of scribblers talked their governments into austerity. That was not

Jeremy Hunt’s Autumn Statement had a curious omission: childcare. The pleas of desperate parents who gathered on Whitehall last month during ‘The March of the Mummies’ appear to have fallen on deaf ears. Demonstrators gathered outside Downing Street banging drums and shouting: ‘Dear Rishi Sunak, we want our choices back.’ So why didn’t the Chancellor listen? Britain’s childcare costs are already among the highest in the world, with the recession and soaring inflation increasing pressures on parents. One way to reduce the burden would be to make nurseries cheaper. For many parents, is cripplingly unaffordable, especially as the current subsidy of 15 hours a week only applies to three and four-year olds.

There had been quiet but growing optimism from some economists that inflation in Britain was nearing its peak as the CPI headline rate had fluctuated slightly – in and out of double digits – over the past few months. But that optimism was put on pause this morning when the Office for National Statistic revealed that inflation rose by a full percentage point from September, taking CPI to 11.1 per cent on the year last month. CPI is at its highest level since 1981, and above the Bank of England’s most recent prediction for where inflation would peak. Meanwhile, real-terms wage increases are failing to keep up with price hikes.

What does Jeremy Hunt want us to know about the Autumn Statement? The Chancellor is in the final hours of writing the economic announcements for Thursday, and today he had his last Treasury questions in the Commons before he gives his long speech. Hunt has been rolling the pitch more assiduously than an MCC groundsman over the past few weeks, with endless briefings about black holes, tax rises and unpopular spending cuts. Today, he was talking again about how ‘difficult’ things were going to be. He said: ‘Despite the difficulty of the package I will be announcing, I will sadly not be drinking any whisky as I do so.’ Hunt

There is a conundrum at the heart of Jeremy Hunt’s comments leading up to the Autumn Statement. Hunt describes inflation as an ‘​​evil’ that ‘erodes the pound in your pocket’: uncontroversial. So Autumn Statement, he says, has been designed by his Treasury to ‘help the Bank of England bring down inflation.’ But controlling inflation is the Bank of England’s remit, so any action will be indirect. By tightening fiscal policy, Hunt is lifting pressure off the Bank to keep pushing raising interest rates. This will be by design on the part of the Treasury. After Liz Truss and Kwasi Kwarteng’s disastrous mini-Budget, markets were predicting rates headed for over 6

Anyone with a mortgage will be in serious trouble. Small businesses will go to the wall. Demand will be hammered. And the cost of government debt will soar. After the Bank of England upped interest rates yesterday to 3 per cent, the highest level in more than a decade, there was one point on which everyone agreed. The Bank might be moving too fast or too slow, but it is imposing steep rises in rates. But hold on: is that right? After all, when you take into consideration rising inflation, the real cost of money has hardly ever been cheaper.  The Bank’s decision to hike rates by 0.75 percentage points