Inflation

Will there be blackouts this winter?

The debate about energy has, understandably, concentrated on what is going to happen to households bills. The numbers are alarming. The energy price cap is now predicted to peak at £3,649 in April 2023, meaning that the average household bill will be above £3,000 for more than a year. As I say in the Times today, this is going to require a response from whoever is prime minister. As Covid showed, in times of crisis contracts across borders are not always honoured But less attention has been paid to the question of whether there’ll be sufficient energy this autumn and winter. National Grid is suggesting that the UK will avoid

Why British Gas’s owner is right to restore its dividend

‘What’s worse, they’re paying the profits to shareholders,’ said a grey-haired woman ahead of me in the Co-op queue. ‘Bloody shareholders,’ her friend of similar age and class spat back. I guessed they were talking about Centrica, parent of British Gas, which at a time when domestic energy bills are rising 23 times faster than wages (as Frances O’Grady of the TUC puts it) has announced half-year operating profits of £1.3 billion, up from £262 million last year – and the restoration of a penny-per-share interim dividend after a three-year gap. Both ladies looked likely to be beneficiaries of pensions nourished by dividends from the likes of Centrica, Shell and

Is the US in recession or not?

There’s an almighty debate ongoing in the US about what exactly a ‘recession’ is. Treasury secretary Janet Yellen said the US economy is not shrinking, saying it is in a state of ‘transition’, not recession. But in a clip from 2000 being circulated on Twitter that is comically apt, Bill Clinton said ‘a recession is two quarters in a row of negative growth’. Regardless of who’s right, the US is currently in Bill Clinton’s definition of a recession. Figures show that the economy shrank by 0.2 per cent in the second quarter of this year, following a 1.6 per cent fall in the first quarter. Over the year, the US economy is now 0.9

James Forsyth

The next PM’s growing to-do list

In theory, the Conservative leadership contest could have stretched to the autumn, but the 1922 Committee and CCHQ decided to crunch the timetable due to the sheer number of crises facing the country. So Tory MPs had only a fortnight to choose the final two candidates, which did perhaps change the course of the race. Given the support that Kemi Badenoch managed to raise in a short period, it is not hard to imagine her being in the last two if she had been given more time to make her case. A longer contest would also have allowed the Tories more time to think about what changes they need to

Kate Andrews

Trussonomics doesn’t add up

I’ve been lucky enough in my working life so far to hold a string of jobs that have allowed me – if not actively encouraged me – to be critical of government. Coming up through Westminster thinktanks in my twenties, I had great fun putting out press releases that tore apart bad public policy. When I had the opportunity to speak to MPs, they’d remind me of the ‘political realities’ that tied their hands and prevented change. In other words, check your policy privilege. Thinktank wonks, commentators and journalists can make all the punchy points they want; they don’t face re-election. But there was one politician who over the years

The problem with euro-dollar parity

The euro is nearly level with the dollar. It should not matter in theory, because of the relatively low share of the US in EU trade. But it does in practice. Some predict that the euro will fall below parity. There is a straightforward explanation for this: the war in Ukraine and unpredictable Russian gas supplies to Europe make the dollar a safe haven for investors. On top of this, US interest rates offer a higher return on investment. But it is not only the dollar. Looking at the broader picture, the European Central Bank’s measure of the euro’s real effective exchange rate against 42 partner countries confirms this trend

Is our card-only culture fuelling inflation?

Is anything anywhere getting noticeably better – economically speaking – or at least less bad? Are commodities and manufactured goods beginning to move more freely, for example, to ease the demand pressures that are stoking inflation? It’s good news that the number of container ships anchored off Los Angeles-Long Beach waiting to unload has fallen from more than 100 in January to around 20 at the latest count, but I note also that dockers there are demanding a 10 per cent pay rise. Drewry’s World Container Index – the handiest indicator of global shipping costs – has fallen 32 per cent from its peak last autumn, but remains five times

Runaway inflation is proving costly for Turkey’s oil-wrestlers

Edirne, Turkey There is a distinctive sound that an oiled-up palm makes as it slaps against an oiled-up pair of leather shorts. Both squelchy and sharp, this noise rings around the Thracian town of Edirne each July as it hosts Turkey’s biggest oil-wrestling championship. As the name suggests, contenders are greased up with either olive, corn or sunflower oil before they start to fight. The competition begins with a languid ritual in which the wrestlers stomp around each other, touching the ground and themselves before commencing their tussle. The winner must then flip his opponent on to his back, often by reaching into his shorts and grabbing hold of a

Letters: Why do we bully PMs’ wives?

Strong leaders Sir: Freddy Gray states that ‘voters seemed most enthusiastic about the leaders who removed their liberties’ (‘Leaderless’, 18 June). I believe people just like to see their government take strong measures. People like to see the effect of a government policy straight away, especially in a crisis. This is probably the reason so many Americans like the idea of Trump’s wall. It is an immediate and physical solution to a large problem that can be seen and felt, even if it is not necessarily the best solution. If the government, for example, came up with a policy that said all those on jobseekers’ allowance must do at least

Where’s Boris’s plan to stop the economic chaos?

Interest payments on the national debt rose 70 per cent last month to £7.6 billion (compared with a year earlier) – largely because of the impact of inflation on income paid to holders of index-linked gilts, which are inflation-protected government bonds. More worryingly, this was 49 per cent more than the official forecast made in March by the Office for Budget Responsibility (OBR). It suggests the OBR’s forecast that the government will have to pay £87.2 billion in interest payments (a colossal sum) may be too low, especially since the ONS is not factoring in the most recent inflation figures in its calculations of the monthly bill. Little wonder Rishi Sunak says ‘rising

Lionel Shriver

The real plan for inflation? To let it rip

Check out these hyperventilating headlines from last week: ‘What the Fed’s largest interest rate hike in decades means for you’ (PBS.org). ‘Federal Reserve interest rate hike opens new era for economy’ (Washington Post). ‘The Fed delivers biggest rate hike in decades to fight inflation’ (National Public Radio). ‘Fed goes for inflation’s jugular with 75bps rate hike’ (Schwab). While it’s true that the US Federal Reserve has not hiked its funds rate by 0.75 percentage points in one go since 1994, the figure prominently missing from those bug-eyed bulletins, and bizarrely unmentioned in all the television news coverage of this ostensibly bold move that I encountered, is what the Fed raised

Boris Johnson’s inflation contradiction

As Boris Johnson tries to limit pay rises to bring down inflation, ministers have no explanation for why planned rises in the state pension and benefits would be less inflationary than increasing teachers’ and nurses’ pay. The government is attempting to limit public sector pay to 3 per cent, while allowing pensions and benefits to rise to around 10 per cent.  This is not to argue against protecting the poorest through the standard indexation of pensions and benefits. But it is to say that Mr Johnson’s pay policy is confusing. And he cannot pretend there is no pay policy. Even refusing to engage directly in pay talks with rail workers – despite owning the

Matthew Lynn

Inflation is a social evil, so why don’t our leaders care?

It was a ‘destroyer of society’, a ‘tax on ordinary people’s savings’ and a threat to social order. You don’t have to spend very long browsing the history books to find thumping quotes from Ronald Reagan or Margaret Thatcher denouncing rising prices as an evil that had to be defeated. And today? Even with prices in the UK now rising at 9.1 per cent, the fastest for 40 years, there are just a few mumbled apologies, coupled with some evasive excuses. That is not good enough. If we are going to defeat inflation all over again, it will take some leadership. We learned today that inflation has nudged up again,

Is Britain heading into a wage-price spiral?

Are wages about to spiral out of control? Boris Johnson certainly thinks there’s a risk. Last week he warned that the economy was ‘steering into the wind’ and that the UK could be entering a 1970s-style malaise. With inflation shooting up to 9 per cent – and expected to go higher still – rail workers are embarking on the first of three days of industrial action today, demanding a minimum pay rise of 7 per cent. Network Rail has offered just 2 per cent, with the potential for an extra 1 per cent on top if they can meet productivity targets later this year. Barristers too have voted for a

How high might interest rates go?

To nobody’s surprise, the Bank of England has hiked its base rate, and, equally unsurprisingly, it has chosen to do so by a relatively modest 0.25 per cent, bringing rates to 1.25 per cent. In 25 years of its existence, the Monetary Policy Committee (MPC) has never raised rates by more than 0.25 per cent at a time. That stands in contrast to the Fed’s decision to raise rates by 0.75 per cent on Wednesday. If the modesty of the rise was supposed to calm markets, however, it doesn’t seem to have worked. The FTSE100, already down nearly 2 per cent on the day, plunged further on the announcement. The

Levelling up is failing

First the good news: the Office for National Statistics figures released today show that pay is rising at its fastest rate in two decades, with regular pay up by 4.2 per cent in the three months for February to April compared with a year earlier. Now the bad news: such is inflation that, in real terms, regular pay was actually down 2.2 per cent – lower than at any time in the past two decades except for a brief period in the autumn of 2011. So, yes, it isn’t just an illusion: we really are getting poorer. That is a big problem not just for households trying to make ends

Why Biden’s inflation plan will fail

It sounded impressive at the time. On the last day of May, a whole ten days ago, president Biden laid out a three-part plan for bringing inflation back under control. It consisted of making sure the Federal Reserve was allowed to do whatever it took to control prices, releasing oil and gas reserves to try to bring down the soaring costs of energy, and fixing supply chains to try to make industry and retailing more competitive. ‘I have made tackling inflation my top economic priority,’ he announced grandly. To listen to the rhetoric from the White House, you might think that this was an issue that could be fixed with a

There’s never been a better time to ditch the net zero agenda

The cost of living crisis is confronting Westminster elites with the stark reality of some of the dubious policy choices they’ve recently made. Last week, the government was forced to postpone its ban on buy one get one free deals on ‘junk food’. The foolishness of outlawing cheap food – a policy Boris Johnson adopted after his spell in intensive care – has been laid bare now that inflation has risen to a 40-year high. Soaring energy bills ought to give proponents of eco-austerity similar pause for thought. Dozens of retail energy companies have gone bust in recent months. We are shipping fracked gas from the US while banning the

Gabriel Gavin

Life in an age of hyperinflation

Istanbul, Turkey On Saturday mornings, Istanbul’s markets and greengrocers are packed with housewives in search of a bargain. Anxious women compare cabbages while chefs haggle over bunches of parsley, passing across thick wads of ten Lira notes – equivalent to about £5 a decade ago, now worth just 50 pence. The rising cost of food has become a national obsession in Turkey. Menemen, a staple breakfast dish of scrambled eggs with tomato, onion and fried green peppers, has seen the cost of its basic ingredients shoot up by 132 per cent in a year. Some shops in the big cities have invested in digital price tags – those little grey electronic

Unemployment is low – so why aren’t wages improving?

For the first time ever, the number of UK job vacancies – now almost 1.3 million – has overtaken the unemployment count. Normally, this would lead to people in work feeling much better off, and lead to pay hikes and bonuses as employers compete to recruit and retain employees. But in fact, regular pay in real terms (that is, after inflation and before bonuses) is down 1.2 per cent – fuelling the cost-of-living crisis that is now the central fact of British politics. What’s going on? In short, today’s ONS labour market overview is yet another example of how inflation can ruin otherwise good news. Total salaries are up 7