Before I go, our economics writer Phillip Inman has sent this:
It was gratifying to hear Treasury select committee chair Mel Stride quote in today’s session the Observer interview with Peterson Institute president Adam Posen, where he said the Bank of England’s monetary policy committee “had no choice” but to increase interest rates aggressively and if that meant triggering a recession, so be it.
Posen thinks Brexit has permanently damaged the UK economy and the negative impact means it needs to help shrink demand with higher borrowing costs to better match a supply side, not so much hit by the pandemic, as the loss of trade with the EU and access to EU workers.
Closing summary
US inflation dipped slightly to 8.3% in April, but stayed close to March’s 40-year high of 8.5%, and food prices rose at the fastest pace since April 1981.
The headline annual inflation rate was higher than expected, as was the core inflation rate, which excludes energy and food, and dipped to 6.3%, from 6.5% in March. Analysts said this could be the beginning of a sustained decline in inflation, but this won’t stop the Federal Reserve announcing more half-point rate hikes in coming months.
German inflation hit a new record high of 7.4% last month as food and energy prices jumped, while inflation in China also picked up, to 2.1% from 1.5%.
On the markets, oil and gas prices have risen, as Russian gas flows via Ukraine have been disrupted for the first time since the war started with Moscow’s invasion of the country in late February.
This comes on top of fears over tighter energy supply, as the European Union works on getting support from Hungary for an embargo on Russian oil. The EU decision needs support from all member states.
The global oil benchmarks, Brent crude and US light crude, have risen 4.3% to $106.92 a barrel, and 5% to $104.81 a barrel, respectively.
Russian gas flows to Europe via Ukraine are down by a quarter today after Kyiv halted use of a major transit route blaming interference by occupying Russian forces, and prepared to divert supplies to a different route.
The European Central Bank’s president, Christine Lagarde, has cemented expectations for an interest rate hike in July, with comments made at a conference in Slovenia today. It would be the first time the central bank raises borrowing costs in more than a decade.
Our other main stories today:
Thank you for reading. We’ll be back tomorrow. Take care! - JK
