EconomyWeb

As markets bet on an increase, economists give their view after Andrew Bailey’s mixed messages

• UK bond yields soar as markets brace for interest rate rise

Less than a month ago Andrew Bailey warned the “hard yards” were still to come. Britain’s economic recovery from Covid-19 was fading, inflationary pressures stalking the country would prove temporary and the Bank of England fiddling with interest rates would hardly produce more lorry drivers or make the wind blow for turbines.

Fast forward and the Bank’s governor appears to have changed his tune. Financial markets are betting that a rate increase is due within weeks after comments from Bailey over the weekend did little to dampen frenzied speculation.

Resolution Foundation finds household incomes set to fall by about 2% amid cost of living squeeze

British households will be £1,000 worse off next year from a cost of living squeeze created by rising energy prices and shortages of workers and supplies caused by Covid and Brexit, a leading thinktank has warned.

The Resolution Foundation said higher levels of inflation would weigh down workers’ earnings next year, contributing to a hit to the average household income in Britain at a time when the government is cutting benefits and raising taxes.

Rolling coverage of the latest economic and financial news

• Latest: UK two-year gilt yields highest since 2019
• Goldman expects three hikes by May 2022
• Governor Andrew Bailey hints at rate rise

Earlier:

• China’s growth slowed to 4.9% over last year
• Full story: Power cuts, property woes and Covid take toll
• End to China’s estate market boom could spell trouble for the economy

The trade body for British manufacturers has hit back at ministers’ accusations that firms have relied for too long on cheap foreign labour, urging them to work in partnership with business instead of viewing it “as the enemy within”.

Make UK is calling on the government to recognise the challenges they are facing – including supply chain disruption and shortages of staff such as HGV drivers – rather than blaming them at a time when they are also facing soaring costs, including for energy and raw materials.

Over time, central banks have been given additional objectives and have expanded their policy toolkits accordingly, particularly when called upon to prevent major shocks from triggering global depressions. But with policy innovation comes new risks, not least to central banks’ independence.

The goal of US policy toward the island should be to reduce uncertainty about America’s intentions and its ability to make good on them, while underscoring to Chinese leaders the economic and military costs of aggression. As much as China’s leaders want Taiwan, they also want to maintain power and the Communist Party’s political monopoly.