The Bank of England is widely expected to announce a rise in interest rates by at least a quarter point to 4.75 per cent around noon today, following yesterday’s release of stubborn inflation figures.
The worse-than-expected data showed headline inflation remained stuck at 8.7 per cent last month, with core inflation — which excludes volatile food and energy prices — rising to 7.1 per cent, the highest level since 1992.
Some economists said the inflation figures had been so bad that the BoE might surprise with a 0.5 percentage point rise or signal a large move to come at the next Monetary Policy Committee meeting in August.
With financial markets now expecting interest rates to hit 6 per cent by the end of the year, driving up the cost of mortgage payments, ministers are braced for a backlash among core Conservative voters ahead of next year’s election.
Prime Minister Rishi Sunak will say today that he feels “a deep moral responsibility” to tackle inflation, arguing that any delay in dealing with the problem will make matters worse.
Analysis: With both sticky inflation and mortgage costs being issues of nationwide concern, the BoE is bound to raise rates. The question is how high.
Opinion: The UK’s difficulties have been compounded by an insufficient response, and the central bank must do whatever it takes to tame inflation, writes Krishna Guha, vice-chair of Evercore ISI.
US monetary policy: Federal Reserve chair Jay Powell defended the central bank’s recent move to forgo an interest rate rise, ahead of his testimony to the Senate banking committee today.
Will yet another rise in interest rates help Sunak with Britain’s economic woes? How high will borrowing costs go? Let us know what you think at firstft@ft.com.
Here’s what else I’m keeping tabs on today:
Missing sub: With less than 20 hours of oxygen estimated left in the Titan submersible, rescue crews are focusing on “underwater noises” picked up by search aircraft.
Modi in US: India’s prime minister Narendra Modi will address a joint session of Congress and attend a state banquet at the White House. Bilateral ties have been strengthened in recent years by the shared goal of countering China.
Microsoft-Activision: Microsoft will face the US Federal Trade Commission at the tech giant’s first federal court hearing over its planned $75bn purchase of gaming company Activision Blizzard.
Results: Accenture, DS Smith, Mulberry and Speedy Hire report.
Five more top stories
1. Exclusive: Russian gas flows to Europe could be shut off by the end of next year when Kyiv’s supply contract with Gazprom expires, the Ukrainian energy minister has said. Despite accounting for almost 5 per cent of Europe’s total gas imports, the five-year transit contract first signed in 2019 is unlikely to be renewed, German Galushchenko told the Financial Times.
2. Exclusive: The billionaire owner of Rocket Internet is poised to receive a €260mn annual dividend after consolidating control over the German technology investment firm, one of Europe’s top venture capital groups. Here’s the FT’s analysis of Oliver Samwer’s huge payout.
3. Exclusive: Relying on onshoring and “friendshoring” won’t be enough for the US to meet climate goals, a senior executive at Japan’s Mitsubishi Heavy Industries has warned, and all supply sources will be needed to meet demand from the clean energy boom sparked by President Joe Biden’s Inflation Reduction Act. Read our full interview with Takajiro Ishikawa.
4. The large settlements taken from JPMorgan and Deutsche Bank over their links to Jeffrey Epstein are a warning to other banks about their potential exposure to a client’s malfeasance, lawyers for women accusing the disgraced late financier of sex abuse have said. The firms acting for the victims secured a combined total of $365mn in compensation.
5. The US Federal Trade Commission has sued Amazon, accusing it of tricking customers into signing up for its Prime service without their consent and “sabotaging” efforts to undo their subscriptions, in the latest salvo by antitrust regulators cracking down on Big Tech. Read more about practices the FTC described as “manipulative, coercive or deceptive”.
The Big Interview
The World Bank has estimated that Ukraine will need more than $400bn to address the damage from just the first year of the war. At this week’s postwar recovery conference in London, Kyiv has been asking for money and expertise, but above all it needs speed, says the official responsible for overseeing rebuilding. Mustafa Nayyem, head of Ukraine’s reconstruction agency, speaks to Henry Mance.
We’re also reading . . .
German politics: Plagued by internal rivalry and a rising far right, opposition leader Friedrich Merz is struggling to attract voters, despite the declining popularity of Olaf Scholz’s government.
Crypto ‘innovation’: Just because something is new doesn’t mean it is valuable to society or should avoid scrutiny, writes Jemima Kelly.
Human fertility: An epidemiologist investigating the global fall in sperm counts thinks a class of chemical used in everything from baby bottles to garden hoses is to blame.
Chart of the day
Short-term US government borrowing costs yesterday exceeded their long-term equivalents by the widest margin in three months, with the gap fast approaching a 42-year record hit during the banking turmoil in March. This situation is known as an inverted yield curve, and has preceded every recession in the past five decades.
Take a break from the news
The National Portrait Gallery in London reopens today after a £41mn refurbishment. The changes are a quiet, subtle and sensitive series of complex interventions with no look-at-me acrobatics, just solid, fine museum design with the visitor and the works rather than the architect in mind, writes Edwin Heathcote.
Additional contributions by Benjamin Wilhelm and Gordon Smith
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