Closing post
Time to wrap up….
Hiring across the US economy moderated in January, but the labor market continued to grow at a steady pace during the transition period between Joe Biden and Donald Trump’s presidencies.
New data from the labor department released on Friday showed 143,000 jobs added to the economy in January, short of the 168,000 expected by economists. The unemployment rate remained steady at a relatively low 4%, edging slightly downward from 4.1% in December.
‘Stagflation’ fears have risen after the Bank of England cut its growth forecast and warns of price rises yesterday.
Today, the Bank’s chief economist said it was too early to declare ‘job done’ in the battle to deflate the economy.
In other news…
Global food commodity prices fell in January, led by sharp falls in sugar and vegetable oils
BoE governor Andrew Bailey has told the BBC that the US must continue to support the IMF and the World Bank
India has cut interest rates for the first time in five years
Hong Kong will complain to the WTO over the tariffs imposed by Donald Trump
UK house prices bounced upwards in January to a record high as many buyers rushed to complete deals before a stamp duty increase this spring, according to one of the UK’s biggest mortgage lenders.
Two former senior figures at bankrupt Woking council are to be investigated by the UK’s accounting watchdog after it racked up more than £2bn in debt on a failed investment spree.
And…the gambling regulator has accidentally handed over more than 4,000 sensitive documents to lawyers acting for the media tycoon Richard Desmond, in an “unprecedented” blunder during its legal battle over the £6.4bn national lottery contract, the Guardian understands.
Goodnight. GW
Updated
A Lloyds Banking Group spokesperson has confirmed that some “talented people” will be lost through its IT shake-up, saying:
“To achieve the ambitious strategy we launched in February 2022 and deliver better service to our customers, we are transforming our business. We are excited about the progress we have made, which is already delivering benefits. As we remain focused on achieving engineering excellence and building highly skilled tech teams as we move faster forward to deliver great outcomes for our customers, we are creating 1200 net new roles.
“Making changes means not only creating new roles and upskilling colleagues but also saying goodbye to talented people who have been part of the Group’s success in the past. Where that is the case, we will do everything we can to support them with the changes recently announced. We know change can be uncomfortable, but we are excited about the opportunities ahead as we propel forward to achieve our growth ambitions and delivering exceptional customer experiences.”
Lloyds IT shake-up puts jobs at risk
Lloyds Banking Group has embarked on a major shake-up of its 6,000 strong IT, tech and engineering workforce that could put more than 200 jobs at risk.
While Lloyds is creating 1,200 new jobs, in areas including software and data engineering, existing staff need to determine whether their skills can translate into the new roles and teams.
One of Lloyds’ staff unions, Accord, estimates that around 200 colleagues could be at risk of redundancy because their roles have been removed from the new organisational structure.
A further 100 colleagues are at risk due to the location, being more than 25 miles or 1hr 15min from one of the designated hubs, Accord said.
It comes as Lloyds makes a major push to digitise its operations and accelerate a customer transition to online and mobile banking. In its announcement to staff, executives went so far as to refer to Lloyds as a “fintech”, saying the overhaul was:
“...a gamechanger for Lloyds Banking Group, that’s going to drive engineering excellence, deliver enhanced customer experiences and fuel our growth to become the UK’s biggest fintech.”
In an online notice about the restructuring plans, Accord said:
“This approach means that successful candidates may have to agree to change their working arrangements to stay in employment. Some others will not be that lucky and will face possible redundancy if they don’t secure a role due to skills, location or the reduced demand for certain roles.”
It added:
“These changes are more than just strategic decisions—they have real and personal consequences for the colleagues affected.”
Lloyds CEO Charlie Nunn is due to give a progress update on his five year strategic plan on 20 February.
The Finance & Leasing Association has welcomed the Financial Ombudsman Service’s (FOS) decision that charging claims management companies must pay £250 to lodge a complaint (see earlier post).
The lobby group’s director general Stephen Haddrill said:
“The introduction of charging is a most important step forward. CMCs are major businesses that should not have a free ride, not least because they have driven a compensation culture that damages investor confidence in the UK and threatens growth. However, today’s decision on the level of the charge is unsatisfactory and we will continue to call for it to be increased.
“Professional representatives should be charged on the same basis as lender firms to deliver a fair and equitable approach. And the suggestion that lenders must pay the lion’s-share of the case fee (£475) even when they are not at fault runs counter to FOS’s aim of applying a ‘polluter pays’ principle. We know of no other example where the loser in a case involving two businesses pays less than the winner.”
TSB CEO's pay surges 37%
The CEO of TSB, Robin Bulloch, has seen his annual pay package surge 37% to £2.6m, in his final year at the head of the UK high street lender.
Bulloch’s pay package is up from £1.9m a year earlier, and grew as a result of the vesting of shares in a long-term bonus scheme. That long-term incentive plan was worth £464,760.
Bulloch is due to hand over to his successor Marc Armengol in the coming weeks, subject to regulatory approval. Armengol, a former strategy director at TSB who has served on the board since 2022, originally joined the UK bank’s Spanish owner Sabadell in 2002.
Meanwhile, TSB marginally increased its banker bonus pool from £25.2m to £25.5m, after recording a pre-tax profit of £290.4m for 2024, up 22.4% on the previous year.
TSB also said on Friday it will pay a £300m dividend to Sabadell.
This all comes with the backdrop of Sabadell trying to resist a hostile takeover bid by Spanish rival BBVA. The prospects of a takeover has raised concerns over whether TSB might be sold or spun out under a new owner.
The CEO of BBVA said in December that he had not yet decided whether he will sell TSB if his bank succeeds in its $13bn hostile bid. Onur Genc told the FT Banking Summit:
We have to see once we complete the deal.”
Wall Street has made a muted start to the final trading day of the week.
The Dow Jones industrial average has risen by 50 points, or 0.11%, to 44,798 points, while the broader S&P 500 is up 0.2%.
Two weeks after being ousted as chair of the UK’s Competition and Markets Authority, Marcus Bokkerink, has defended his record at the regulator.
In a five-page (!) post on LinkedIn, Bokkerink says he advocated an approach of “driving economic growth that prioritises the benefits for consumers and businesses across the UK”.
That reads like a rebuttal to the government, who forced Bokkerink out as part of a push to make regulators take growth more seriously, as ministers tried to woo business leaders at Davos.
Bokkerink says he made the CMA drive “tangible benefits” for people, businesses and the UK economy, with a view that “market-based solutions” were better than regulation, where possible, and raised transparency and accountability at the regulator.
He concludes by pointing out that the CMA had already published a draft plan about it strategy, saying:
“The government has indicated it seeks a different approach to what is set out in that plan . . .
While it is not yet explicit what that different approach will be, there is of course always an alternative.”
“The US employment market remains in decent health,” argues Neil Birrell, chief investment officer at Premier Miton Investors, adding:
The January jobs gain was a little below expectations, but labour force participation was strong and average earnings were impressive.
There is nothing in these numbers to suggest anything other than the economy remains robust, without rushing ahead or weakening in a worrying way.
Policy makers will like what they see and we can now get back to worrying about global trade and tariffs.
California fires and Trump uncertainty may have hit hiring
Kathleen Brooks, research director at XTB, says:
January job creation could have been impacted by the fires in California and from uncertainty caused by the change in administration in the US.
President Trump’s tariffs and his new economic policy could have meant that employers sat on the sidelines in January, and we will need to see if that continues this month.
Updated
Today’s US jobs report could make the Federal Reserve’s job harder, suggests Joe Gaffoglio, CEO and president at Mutual Of America Capital Management.
He says:
“The slower jobs report for January could make the Federal Reserve’s work tougher with respect to the timing and pace of future interest rate cuts, as it will have to balance a weakening labor market against inflation levels that remain above their stated target.
While hiring across sectors was uneven, with service providers driving most of the job creation, it’s worth noting that wage growth overall remains strong and fewer workers are quitting their jobs.”
Wage growth picks up
In a boost to US workers, average hourly earnings rose 0.5% in January, faster than the 0.3% recorded in December.
While that will please employees, it won’t encourage the US Federal Reserve to cut interest rates more quickly.
Today’s jobs report says:
In January, average hourly earnings for all employees on private nonfarm payrolls rose by 17 cents, or 0.5 percent, to $35.87.
On an annual basis, wages increased 4.1% in the 12 months to January.
Updated
Interestingly, the US labor statistics bureau has also slashed its estimate for employment levels last spring, by over half a million jobs.
“In accordance with annual practice,” the BLS has updated its estimates for payroll numbers. It says:
The seasonally adjusted total nonfarm employment level for March 2024 was revised downward by 589,000.
On a not seasonally adjusted basis, the total nonfarm employment level for March 2024 was revised downward by 598,000, or -0.4 percent. Not seasonally adjusted, the absolute average benchmark revision over the past 10 years is 0.1 percent.
US jobs creation slowed in January
Newsflash: Job creation across the US has slowed at the start of Donald Trump’s second term, after a blistering finish to 2024.
US non-farm payrolls rose by 143,000 in January, new data from the Bureau of Labor Statistics shows. That’s weaker than the 170,000 new jobs expected last month.
It’s also a sharp slowdown on December, where the BLS has revised up its estimates and now says payrolls rose by 307,000, 51,000 more than its initial estimate of 256,000.
The US unemployment rate edged down to 4.0% in January, the BLS says, adding:
Job gains occurred in health care, retail trade, and social assistance. Employment declined in the mining, quarrying, and oil and gas extraction industry.
The Bank of England’s chief economist then suggests there is a danger that the rise in employers NICs contributions gets “overstated in importance”.
Huw Pill explains that taking a ‘macroeconomic view of the UK economy over the longer run” shows that that increase is not the main driver on the labour market, compared to pandemic and inflationary shocks over recent quarters.
Pill suggests that the media may have emphasised the NICs issue too much, but does also understand that many firms will be facing a large, immediate, challenge of higher costs.
He adds that the tax increase is affecting employment levels, but will also lead to higher prices.
Huw Pill is then asked whether the Bank could cut UK interest rates by 50 basis points (half a percentage point), as two policymakers voted for yesterday.
Pill doesn’t sound very keen, arguing that the Bank’s new policy of taking a “gradual and careful” approach suggests it won’t be rushing into more sizable moves.
He isn’t ruling anything out, though.
Updated
This could be a tough Pill for some to swallow
— Michael Brown (@MrMBrown) February 7, 2025
*BOE'S PILL: NOT IN SITUATION WHERE CAN DECLARE 'JOB DONE'
*BOE'S PILL: NEED TO MAINTAIN SOME RESTRICTION IN POLICY
*BOE'S PILL: NEED TO BE GRADUAL AND CAREFUL IN EASING
BoE's Huw Pill: can't declare "job done" over inflation yet
The Bank of England’s chief economist, Huw Pill, has welcomed signs that pay growth is slowing, but warned that it’s too early to claim victory over inflation.
Speaking to the Bank’s agents on a video call today, Pill says that the Bank now expects average earnings to rise by 3.7% this year. A year ago, it forecast 5.3% – a prediction that proved accurate.
Pill (who got in hot water two years ago for saying Britons ‘need to accept’ they’re poorer) says this fall in pay growth shows that there is an ongoing, successful, process of disinflation underway.
That process of disinflation helped the Bank to cut interest rates yesterday.
Pill adds, though, that pay growth of 3.7% is higher than the Bank expected a few months ago – and cautions that the pace of disinflation may not be not quite as strong as that we had previously thought.
He warns:
That means that we’re not in a situation where we can declare job done.
Pill adds that the Bank still needs to maintain some restrictions to its monetary policy stance, to squeeze out remaining persistent domestic inflation pressures, to bring inflation down to the 2% target.
Updated
Truss-era mortgage borrowers to benefit from lower rates
Mortgage borrowers were handed a boost by the Bank of England’s decision yesterday, but none more so than households who had been unlucky enough to remortgage in the period of sky-high borrowing costs around the time Liz Truss was prime minister.
The Bank says more than a quarter of mortgage accounts are expected to see monthly payments decrease between December 2024 and the fourth quarter of 2027. That’s equivalent to about 2.4 million mortgages which had been taken out at higher fixed rates than are currently available.
Figures from the data provider Moneyfacts show the average 2-year fixed residential mortgage rate today is 5.49%, down slightly from the 5.50% available yesterday as the Bank cut its key base rate from 4.75% to 4.5%.
However, that’s down from levels above 6% in late 2022 after the former prime minister’s ill-fated mini budget blew up the bond market.
Mortgage rates depend on financial market expectations for the Bank’s base rate - influenced by the outlook for economic growth and inflation - but also high street lenders appetite for risk and competition.
Millions of mortgage borrowers are still, though, facing a hike in their monthly repayments. The latest data in the Bank’s monetary policy report, published yesterday, shows about half of mortgage accounts - 4.4 million - are due to reprice onto higher rates between December 2024 and the fourth quarter of 2027.
The Bank of England expects the increase in employer national insurance contributions to push wage growth down, and also push up prices a little bit, explains the Bank’s director of monetary analysis, Fergal Shortall.
The Bank of England believes a range of “regulator prices”, including water bills, bus fares, and private school fees, will push up inflation this year, monetary analysis director Fergal Shortall.
The big increase, though, comes from higher energy bills later this year, the Bank forecasts.
Ofwat is allowing water bills in England and Wales to rise by 36% over the next five years, the national bus fares cap has gone up from £2 to £3, and VAT has been applied to private school fees since the start of the year.
Updated
The Bank of England is briefing its agents around the country about yesterday’s interest rate cut, and the state of the economy.
The Bank’s director of monetary analysis, Fergal Shortall, flags that inflation is expected to hit 3.7% by late summer – up from 2.5% in December.
He says:
Disinflation is continuing, broadly speaking, as expected, and that supported a further 25 basis points cut in interest rates yesterday, but we are likely to see some bumps in the road over the coming months.
Energy is the biggest factor behind that, Shortall says, but the Bank’s monetary policy committee does expect “a steady return to the 2% [inflation] target”.
Shortall adds that there is “weakness in the activity data at the moment”, suggesting that the economy has been pretty flat since around March last year.
Claims management companies face £250 fee
Claims management companies, which rose to fame during the payment protection insurance (PPI) scandal, will be hit with a £250 fee for filing complaints at the UK’s Financial Ombudsman Service.
The charge, which will come into force in April, will create an new barrier to CMCs that have been accused of flooding the system with complaints, particularly over the motor finance commission scandal. CMCs file compensation claims on behalf of consumers, often on a “no-win no fee” basis. The catch for consumers is that they usually shell out a 40%-plus cut of any payout.
The Financial Ombudsman Service (FOS) said that these “professional representatives” were behind around 103,000 of the 220,000 of the cases – around 47% – sent to the FOS between April and December last year.
The news comes a day after the FOS CEO Abby Thomas unexpectedly resigned. Sky News claims she had clashed with the FOS board on a number of issues, including the CMC charge, having argued for fees as low as £25.
The charges are one of a range of complaints that City bosses have raised about the FOS, which is now facing government scrutiny. Chancellor Rachel Reeves used her Mansion House speech in November to call for changes, saying “reform is needed to create a surer climate for investment.”
Commenting on the new charge, James Dipple-Johnstone, interim Chief Ombudsman at the FOS, said:
“We’ve seen more cases brought by professional representatives, but fewer of these cases leading to a better outcome for their clients. Currently there is little commercial incentive for representatives to ensure the complaints they bring are well-founded or have merit. As a not-for-profit service, we expend our finite resources handling thousands of withdrawn or abandoned cases, which can lead to longer wait times for other customers.
“The charges we are introducing from April will bring better balance to our fee model, helping us to resolve disputes quickly and ensuring a wider contribution towards our running costs.”
The FOS has also cut that £650 processing fee that it charges City firms who face a complaint lodged by a CMC to £475 – if it is rejected or withdrawn. But the change is unlikely to cause much celebration. Companies still have to pay a £650 fee in cases where the CMC complaint is upheld.
Furthermore, CMCs will essentially be given a rebate - getting £175 back if their claims are upheld, and will be able to lodge 10 free cases per year.
It will remain free for consumers to complain themselves. There will also be no charge if the complaints are lodged on their behalf by charities, families and friends who may be helping them.
*NOTE: this post has been updated to reflect that the £650 still applies to City firms if a CMC-lodged complaint is upheld.
Updated
Footfall figures released this morning show that consumers returned to the shops in January after a disappointing festive period for the retail sector.
Total UK footfall increased by 6.6% year on year in January, a significant jump from December when retailers saw 2.2% fewer shoppers than the previous Christmas, according to British Retail Consortium (BRC)-Sensormatic data.
High street footfall increased by 4.5%, while visits to retail parks and shopping centres were up 7.9% and 7.4% respectively.
Where does Bank Rate go from here onwards?
Economists are pondering where UK interest rates will head over this year, and beyond, as polcymakers try to fight deflation.
Professor Costas Milas, of the University of Liverpool’s management school, reckons
The Bank of England’s Monetary Policy Report is based on the assumption of market expectations of interest rates, namely that Bank Rate drops to 4.15% in 2026Q2. My feeling is that Bank Rate will drop lower than that.
I estimate a so-called “policy reaction function” where Bank Rate responds to forecasts of inflation one-year ahead, the output gap, and economic policy uncertainty (the latter, of course, also being influenced by Trump’s trade threats). Scenario 1 follows the Bank’s inflation forecasts, with inflation dropping to 2.3% in 2027Q1 (this is the “good inflation” scenario).
In Scenario2 (the “bad inflation” scenario), inflation gets stuck at 3.0% all the way between 2026Q1 and 2027Q1. In both cases, output and economic policy uncertainty developments outweigh, to some extent, the inflationary pressures and Bank Rate drops either to 3.5% (“good inflation” scenario) or to 3.75% (“bad inflation” scenario).
But some investment banks argue that the markets got carried away with yesterday’s interest rate vote, which showed two policymakers wanted a deeper – half-point – cut.
Bank of America say:
The 7-2 vote itself, taken in isolation, was more dovish than consensus expectations, leading the market to price increasing likelihood of cuts at non-Monetary Policy Report (MPR) MPC meetings in the future. However, the report itself told a completely different story, at least on our reading of it.
World food commodity prices fall
World food commodity prices have fallen, in welcome news for global consumers, due to lower sugar, vegetable oil and meat prices.
The UN’s FAO Food Price Index (FFPI) dropped in January, by 2.1 points to 124.9 points, showing that a basket of food commodities became cheaper.
The overall index was 7.3 points, or 6.2%, higher than a year ago, but also 35.3 points (22%) below the peak reached in March 2022 after Russia invaded Ukraine.
The report shows that vegetable prices fell by 5.6% in the month, mainly driven by lower world palm and rapeseed oil prices.
Meat prices fell 1.4%, due to lower international ovine, pig and poultry meat prices.
Sugar fell 6.8%, due to generally favourable weather in Brazil lifting supply prospects.
But dairy rose 2.4%, led by a jump in cheese prices.
Two of the world’s largest aircraft lessors have settled lawsuits in the Irish courts against insurers over jets stranded in Russia following Western sanctions in 2022.
Avolon and BOC Aviation said they had reached commercial resolutions with their insurers in the Irish case and discontinued their proceedings, declining to disclose details of the settlement for commercial reasons.
Singapore-based BOC said it would continue to pursue a separate claim against insurers in London’s High Court, where another ‘mega-trial’ began last year.
Dublin-based Avolon recorded an impairment of $304 million in 2022 to cover the full financial impact of having 10 of its 1,000-plus fleet stuck in Russia. BOC took a write-down of $804 million in the same year relating to 17 aircraft.
A day after hitting a record high, the UK stock market is in more subdued mood today as investors mull over the stagflation risks.
The blue-chip FTSE 100 share index has dipped by 11 points, down 0.13% at 8716 points.
Financial services group Legal & General are the top riser, up 7%, after agreeing a deal to sell its US protection business to Japanese life insurer Meiji Yasuda for $2.3bn in cash.
Under the arrangement, Meiji Yasuda will take a 5% stake in L&G, and the two firms will form a strategic partnership.
Reuters: Shein poised to slash valuation to $50bn in London IPO
Online fast-fashion retailer Shein is set to cut its valuation in a potential London listing to around $50bn, Reuters is reporting,citing three people with knowledge of the matter.
That’s nearly a quarter less than the company’s 2023 fundraising value, reflecting various headwints hitting Shein.
Reuters explains:
The company’s business prospects have come under a cloud in recent days after the Trump administration said it would close the “de minimis” duty exemption in the United States, ending an import rule that had helped Shein keep prices low.
The measure’s removal could hurt Shein’s profitability and push up product prices in the U.S., its biggest market, analysts and industry experts have said.
Shein is also facing challenges in Europe, where parcels sent from China by online retailers will face strict new customs controls as part of a crackdown by the European Commission on “dangerous products” flooding the EU market.
Hong Kong’s appeal to the WTO (see earlier post) comes as Donald Trump’s new trade war is further blurring the lines between Hong Kong and Beijing.
This is threatening to erode the city’s main selling point as a global financial hub, reports Bloomberg, explaining:
When Trump slapped a 10% levy on China this week, that action for the first time also applied to Hong Kong goods, after the president in 2020 signed an executive order to remove the city’s special privileges.
One day later, the US Postal Service put a ban on incoming Chinese parcels that also swept up the commerce center, before reversing course hours later.
Updated
The economic forecasters at EY Item Club predict UK house prices will probably onle record a “modest improvement” across the course of 2025.
Following January’s 0.7% jump in prices, Matt Swannell, chief economic advisor to the EY ITEM Club, says:
“Early indicators of housing demand point to another month or two of decent performance for the housing market ahead of the Stamp Duty changes.
But over 2025 as a whole, we think that the housing market will show only a modest improvement, given the Bank of England’s gradual and cautious approach will see interest rates fall slowly against a backdrop of stretched housing affordability.”
Hong Kong to complain to WTO over US tariffs
Hong Kong will file a complaint with the World Trade Organisation over tariffs imposed by Donald Trump earlier this week.
The Hong Kong Special Administrative Region (HKSAR) government today said it was unfair that the US was imposing an additional 10% on products of Hong Kong, so it has decided to complain to the WTO.
A HKSAR spokesman said:
“The US’ measures are grossly inconsistent with the relevant WTO rules and ignore our status as a separate customs territory as stipulated in Article 116 of the Basic Law and recognised by the WTO. The HKSAR Government will formally launch procedures in accordance with the WTO Dispute Settlement Mechanism against the US’ unreasonable measures to defend our legitimate rights.”
The spokesman added that Hong Kong is “a staunch supporter” of the rule-based multilateral trading system, and urged the US to take immediate actions to rectify the situation.
The complaint comes three days after Donald Trump imposed an additional 10% tariff on goods from China, prompting Beijing to retaliate with tariffs on some US imports.
On Wednesday, China filed its own complaint at the WTO over the tariffs, arguing the actions are “protectionist” and break WTO rules.
Updated
India makes first interest rate cut since 2020
Earlier today, India’s central bank cut its benchmark interest rate for the first time in nearly five years.
The Reserve Bank of India lowered the repo rate, which the central bank lends to commercial banks, by a quarter of one percent, to 6.25%.
The move comes as officials try to reverse slowing economic growth in the world’s most populous country.
Announcing the rate cut, the RBI’s monetary policy committee say:
The global economy is growing below the historical average even though high frequency indicators suggest resilience amidst continued expansion in world trade. The world economic landscape remains challenging with slower pace of disinflation, lingering geopolitical tensions and policy uncertainties. The strong dollar, inter alia, continues to strain emerging market currencies and enhance volatility in financial markets.
On the domestic front, as per the First Advance Estimates (FAE), real gross domestic product (GDP) is estimated to grow at 6.4 per cent (y-o-y) in 2024-25 supported by a recovery in private consumption. On the supply side, growth is supported by the services sector and a recovery in agriculture sector, while tepid industrial growth is a drag.
UK government accelerates push for warmer rented homes
Elsewhere in the property world, the UK government is forcing private landlords in England and Wales to improve the energy performance ratings of their properties.
Under the plan, by 2030 all private landlords will be required to meet a higher standard of Energy Performance Certificate (EPC) C or equivalent in their properties – up from the current level of EPC E.
Currently, 48% of private rented homes in England meet this standard.
Ministers say the plan could save private renters £240 per year on average on their energy bills.
Energy Secretary Ed Miliband said:
For years tenants have been abandoned and forgotten as opportunities to deliver warm homes and lower energy bills have been disregarded and ignored.
Landlords have concerns, though. Ben Beadle, chief executive of the National Residential Landlords Association, says:
“We all want to see rented homes as energy efficient as possible, but that will require a realistic plan to achieve this.
The chronic shortage of tradespeople to carry out energy efficiency works needs to be addressed, alongside a targeted financial package to support investments in the work required as called for by the Committee on Fuel Poverty and Citizens Advice.
Importantly a realistic timetable is needed if the 2.5 million private rented homes, which will not currently meet the Government’s proposed standards, are to be improved.”
BoE governor calls for US to support World Bank and IMF
The governor of the Bank of England has urged Donald Trump’s administration to maintain US support for the World Bank and the International Monetary Fund.
Andrew Bailey told the BBC he was “following extremely closely” whether the Trump administration will change its support for the two bodies, which are both major global economic institutions.
Sources in Washington said the two institutions were caught by a White House executive order for a review of United Nations (UN) and other international organisations.
Bailey said it is “very important that we don’t have a fragmentation of the world economy”.
He added:
“A big part of that is that we have support and engagement in the multilateral institutions, institutions like the IMF, the World Bank, that support the operation of the world economy. That’s really important.”
UK house prices: the regional picture
Despite the 0.7% rise in UK house prices in January, the rate of annual property price inflation slowed in two thirds of the UK’s nations and regions at the start of the year.
Halifax reports that:
Northern Ireland continues to have the strongest annual property annual price growth in the UK, though at +5.9% in January this eased considerably compared to December (+7.3%). Properties in Northern Ireland now cost an average of £205,473.
House prices in Wales were up +3.6% compared to the previous year, with properties now costing an average of £227,397.
Scotland once again saw a lower rise in house prices compared to the rest of the UK, with properties in the country now worth an average of £210,690, +2.4% more than the year before.
In England, the North East has overtaken the North West as the region with the strongest annual property price growth, up +5.2% compared to the previous year, with properties now costing an average £178,696. This is the first time since September 2023 that the North West has not topped the table of English regions for annual growth.
London retains the highest average house price in the UK, at £548,288, up +2.8% compared to last year
January house prices kicked off with a 0.7% increase on last month’s festive efforts, making the average house price, according to lender @HalifaxBank now £299,138. That said, the annual rate of inflation slowed for two thirds of all regions, Northern Ireland however remains the… pic.twitter.com/2rxUUcwIfW
— Emma Fildes (@emmafildes) February 7, 2025
Updated
UK house prices rise in January
Economic growth may be slowing, but UK house prices continues to rise – according to lender Halifax.
It has reported that house prices increased by 0.7% in January, following a dip of 0.2% in December, lifting the average price to a new record high of £299,138 (on Halifax’s index).
On an annual basis, house prices were 3% higher – down from 3.4% in November.
Amanda Bryden, head of mortgages at Halifax, says the UK housing market started the year “on a positive note”.
She suggests that some buyers may have been keen to avoid increases in stamp duty coming this spring in England and Northern Ireland.
Affordability is still a challenge for many would-be buyers, but the market’s resilience is noteworthy. There’s strong demand for new mortgages and growth in lending.
With a stamp duty increase looming, some of this demand may have come from first-time buyers eager to complete transactions before the end of March.
Bryden predicts that UK mortgage rates are likely to hover between 4% and 5% this year, adding:
“Despite geopolitical uncertainties, and waning consumer confidence, other key indicators look fairly positive for the housing market. The Bank of England has made its first base rate cut of the year, and there are probably more to come.
Household earnings are expected to continue outpacing inflation – albeit that gap may narrow – easing some of the financial pressure still being felt from the cost-ofliving squeeze
Updated
UK stagflation fears - what the papers say
Bank of England governor Andrew Bailey told reporters that he doesn’t use the word ‘stagflation’, arguing that it doesn’t have a “precise meaning”.
Some of the UK newspapers disagree – with stagflation fears appearing on several of today’s front pages.
The Guardian points out that the chancellor’s plans for growth suffered a double blow yesterday, with the Bank signalling that people would face a fresh squeeze on living standards from rising inflation even as the economy stalled.
Friday's GUARDIAN: Fears over stagflation as Reeves growth plan suffers double blow#TomorrowsPapersToday pic.twitter.com/TKJJOfGtSa
— Jack Surfleet (@jacksurfleet) February 6, 2025
The Daily Mail points out that Britain last suffered a bout of stagflation – soaring prices and falling growth – in the 70s.
Friday's DAILY MAIL: New era of stagflation#TomorrowsPapersToday pic.twitter.com/NJSyY0t5YO
— Jack Surfleet (@jacksurfleet) February 6, 2025
The Daily Express calls the growth forecasts a ‘wake-up call’ for Reeves.
Friday's DAILY EXPRESS: Reeves 'wake up call' on 'putrid' figures#TomorrowsPapersToday pic.twitter.com/qp1ABxupMO
— Jack Surfleet (@jacksurfleet) February 6, 2025
While the Financial Times points out that the weakening pound pushed UK stocks to a new record.
Friday's FINANCIAL TIMES UK EDITION: Bank of England halves forecast for growth as rate cut powers FTSE 100#TomorrowsPapersToday pic.twitter.com/e5iJaNMDEH
— Jack Surfleet (@jacksurfleet) February 6, 2025
Introduction: Stagflation fears rise after grim Bank forecasts
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Stagflation fears are rippling through the City today after the Bank of England slashed its growth forecasts on Thursday, and lifted its inflation forecast.
As we covered yesterday, the Bank halved its forecast for GDP growth this year to just 0.75%, down from 1.5% expected three months ago.
In another blow to the government, the Bank predicted inflation would peak at 3.7% later this year, nearly twice its 2% target, as rising energy prices push up the cost of living again.
Despite this grim outlook, the Bank cut interest rates, arguing that a “continued, gradual easing of underlying inflationary pressures” is underway in the UK economy.
Weaker growth and rising inflation is a toxic combination for chancellor Rachel Reeves; it could be kryptonite to her hopes of sticking to the fiscal rules laid out in last years budget.
As our economics editor Heather Stewart explains
Economic output is expected to have contracted by 0.1% in the final three months of 2024 and expanded by just 0.1% in the current three-month period – narrowly skirting a recession, defined as two successive quarters of decline. The Bank suggests productivity, which Reeves badly wants to improve, has declined.
If the independent Office for Budget Responsibility (OBR) takes a similar view, it could make a sharp downgrade to its growth forecasts when these are published on 26 March, from the 1.9% it was predicting in October.
Whether that wipes out Reeves’s room for manoeuvre against her fiscal rules depends on how the OBR assesses the longer-term outlook. Market expectations of lower rates in the UK may bear down on the government’s cost of borrowing, helping to offset some of the impact on the public finances from weaker growth.
But the MPC’s gloomy prognosis sits in stark contrast to Reeves’s determinedly upbeat messaging on growth in recent week
BoE governor Andrew Bailey also cautioned that while he is very supportive of Reeves’s growth agenda, measures such as a new Heathrow runway or new reservoirs won’t move the growth dial in the short term.
Yesterday’s rate cut brings down Bank Rate to 4.5%, and the City money markets expect at least two more quarter-point cuts by the end of the year.
But if inflation pushes higher, those forecasts could come under pressure.
Van Luu, head of currency and fixed income solutions strategy at Russell Investments,
Making policy in a “stagflation” environment with high inflation and lackluster growth is a formidable challenge. Tax hikes and rises in administered prices will at least temporarily increase price pressures.
The balance between the inflationary impulse and a slackening jobs market will determine the pace of further rate cuts in 2025.
The agenda
7am GMT: Halifax house price index for January
7am GMT: German trade data for December
1.30pm GMT: US non-farm payroll for January
