Closing summary
The Bank of England will intensify its squeeze on the economy over the coming months as it seeks to bring down the highest inflation rate in 40 years, its chief economist has warned.
Noting that Threadneedle Street was facing its toughest challenge since being granted independence in 1997, Huw Pill said “further work needs to be done” to bring the annual inflation rate back to the government’s 2% target.
Inflation soared to 9% in April as the rising cost of gas and electricity pushed household energy bills to record levels and the escalating cost of food and transport also contributed to the surge in the cost of living.
The Bank’s nine-strong monetary policy committee has raised borrowing costs at its last four meetings but Pill used a speech in Cardiff to signal further increases were needed to prevent high inflation from becoming embedded in the economy.
“In my view, we still have some way to go in our monetary policy tightening, in order to make the return of inflation to target secure,” Pill said.
Inflation has driven UK consumer confidence down to a record low, even worse than after the 2008 financial crisis:
Joe Staton, client strategy director at GfK, said:
“This means consumer confidence is now weaker than in the darkest days of the global banking crisis, the impact of Brexit on the economy, or the Covid shutdown.”
UK consumer #confidence falls to lowest since records began in 1974.
— Andy Bruce (@BruceReuters) May 20, 2022
When you consider all the crises over the last 50 years or so, this is serious stuff👇 pic.twitter.com/zIKKj4jM9W
Former BoE governor Lord King said central bankers had blundered by pursuing money-printing policies, and needed to raise interest rates higher.
They shouldn’t have been printing the extra money; what governments were doing was enough to deal with the consequences of COVID. They’re now worried about inflation, when they weren’t before…
[But] it’s not all the result of the Russian invasion of Ukraine. This was foreseeable, because there was a mistaken diagnosis of what needed to be done with the pandemic.”
Economists have warned that the long-term outlook for the economy is weak, despite a surprise rise in retail sales last month.
Retail sales volumes rose by 1.4%, but the increase was driven by increased spending on alcohol, tobacco and sweet treats at supermarkets, as cash-strapped households stayed at home rather than going out socialising.
Nationwide executives have said they are “highly concerned” about the outlook for inflation, warning that rising costs could harm already struggling customers and drag down house prices.
Rishi Sunak has become the first frontline politician to be ranked among the UK’s wealthiest people, only days after the chancellor warned consumers that “the next few months will be tough” as the cost of living squeeze intensifies.
Sunak, a former hedge fund manager, and his Indian heiress wife, Akshata Murty, were named on the Sunday Times rich list as the 222nd wealthiest people in the UK, with a combined £730m fortune.
China’s central bank has cut its main mortage interest rate to stimulate its economy, cheering markets.
But economists say Beijing must take wide-ranging measure to protect its economy, as lockdowns hit growth and push up inflation.
Costs and delays at Britain’s new nuclear power station at Hinkley Point in Somerset have increased, again. It will start operating a year later than planned and will cost an extra £3bn.
Russia will stop gas flows to neighbouring Finland on Saturday morning, after Finnish state-owned gas wholesaler Gasum refused to pay Gazprom Export in roubles as Russia has demanded.
Shares in THG soared by a quarter on Friday, as investors anticipated a possible multibillion-pound bidding war for the online retailer, including a possible offer from property tycoon Nick Candy.
The digital marketing group Next Fifteen has struck a £310m deal to buy M&C Saatchi, gazumping the tech entrepreneur Vin Murria’s takeover attempt, and ending almost three decades of independence of one of Britain’s most famous advertising agencies.
HSBC is under pressure to fire a senior banker in charge of responsible investing after a speech in which he described warnings about the climate crisis as “unsubstantiated” and “shrill”, made light of major flooding risks, and complained about having to spend time “looking at something that’s going to happen in 20 or 30 years”.
Have a lovely weekend, we’ll be back on Monday...GW
Updated
After decades of planning, 13 years of construction and nearly £20bn spent, Crossrail’s Elizabeth line services are ready to roll, with the first gates finally due to open next Tuesday.
Our transport correspondent Gwyn Topham sets the scene:
This is still not the finished deal. But its crucial, magnificent core will now be open: the 13 miles of tunnels bored under central London, nine brand new cavernous stations, and digitally controlled trains offering space and speed that underground passengers have never yet enjoyed.
Over the last three years, as construction delays and overspending exposed the hubristic boasts of Crossrail bosses, talk of a British engineering triumph has been muted. Now, though, it is time to marvel again.
“These stations are like cathedrals. These trains are the longest we’ve seen in London,” says Sadiq Khan, the capital’s mayor. “It is world-leading, world-class. I challenge anyone who uses the Elizabeth line next week not to have their breath taken away – it’s just mind-blowing.”
