Kate Andrews

Has inflation peaked in the United States? Today’s update from the Bureau of Labor Statistics shows the annual rate of inflation has fallen slightly, from 8.5 per cent in March down to 8.3 per cent in April. There are signs of slowdown in the monthly figures, too: prices rose 0.3 per cent between March and April, after rising 1.2 per cent between February and March. The Democrats will struggle to hail this relatively small dip as any kind of meaningful victory Still, markets don’t seem particularly encouraged by the news. US stock futures immediately took a dip when the figures landed. Emphasis seems to be on the fact that inflation once again outpaced predictions, with CPI up 0.3 per cent on the month, despite the consensus predicting a rise of 0.2 per cent.

The Federal Reserve is playing catch-up. Today’s interest rate hike is only the second rate rise since 2018 – but it’s the first half-point rise in 22 years. As expected, the federal-funds rate – the interest rate banks use to lend to each other on a short-term basis – will rise from a target range of between 0.25 and 0.5 per cent, to a range between 0.75 and 1 per cent. After many months of insisting price hikes would be transitory, with inflation soaring to a 40-year high in the meantime, the Fed is finally acting to curb it. By historical standards, today’s hike keeps interest rates very low – but that’s all expected to change over the next year.

This morning’s retail sales update isn’t pretty. Sales volumes fell by 1.4 per cent last month, following a 0.5 per cent drop in February (revised, and worse, than the original estimate of 0.3 per cent). The biggest fall came in non-store retail shopping: almost an 8 per cent month-on-month fall. However, the Office for National Statistics points out that overall sales volumes are still roughly 20 per cent higher now than they were pre-pandemic. But the recent drop indicates that the cost-of-living crisis is already worsening, as inflation – now at 7 per cent – is taking its toll on real incomes and is already prompting changes in consumer behaviour. As Capital Economics notes today, the 9.

How is the UK’s economic bounce back from the pandemic years going? Next week the Office for National Statistics will provide us with a host of new monthly data, including an economic growth and labour market update for the month of February and the headline inflation rate for March. The inflation rate is the real kicker. While GDP and labour market headlines from February will allow us to further gauge how strong the economy was at the start of the year, March’s CPI rate will factor the impact of Russia’s invasion of Ukraine. This has undoubtedly had an impact on prices: the cost of energy, in particular.  There’s little doubt that the inflation rate is going up again. But by how much?

Since the spring statement last week, Rishi Sunak has been dealing with complaints from all sides: the right have been arguing he should have been bolder with tax cuts, the left insists more support is needed to help people with the rising costs.  With the Office for Budget Responsibility projecting the biggest fall in living standards since records began, rumours of U-turns and further announcements started bubbling over the weekend. The media, the opposition, and even some Tory MPs have been asking Treasury representatives over and over again: is that all? In a keynote address hosted by the Institute of Economic Affairs this morning, chief secretary to the Treasury Simon Clarke answered that question in no uncertain terms: yes, for now, that is all.

Here’s the Rishi Sunak paradox: he proudly defines himself as a low-tax Tory but under his watch taxes are reaching a 71-year high. There are plenty of Tories who want to ditch next month’s National Insurance increase but Sunak is firmly opposed – mainly because he wants to link up in people’s minds that more money for the NHS and social care doesn’t manifest out of thin air. But pressure is on at tomorrow’s spring statement to make clear what kind of Chancellor he really is. Does he come from the long line of Tories who like tax cuts in theory but not in practice – or does he have another agenda? Sunak’s starting position is that to cut tax, you need to restrain spending. For the Chancellor, it’s a simple point about trade-offs.

What support might the Chancellor dish out to help with the cost of living squeeze in the Spring Statement this week? In line with his previous media appearances, Rishi Sunak's statements ahead of his mini-Budget this morning on the BBC didn't give much away, as the Chancellor 'can't speculate' on what's to come in his announcements this week. But the pressure is on to address the energy and basic goods prices which have been skyrocketing since we emerged from the height of the Covid emergency: the energy price cap lifts nearly £700 this spring, and is likely to rise again in the autumn. https://www.youtube.com/watch?