There is no doubt that as the economy emerged from Covid lockdowns in 2021, the world experienced a surge in inflation, not seen since the 1970s. There are many supply and demand factors, which have caused this unexpectedly high inflation. The first factor is that Covid lockdowns, especially in China and Asia, disrupted global supply …
The recent surge in UK government gilts is a warning that unfunded tax cuts in a time of high inflation can cause markets to sell off UK bonds and make it harder to finance future government borrowing. After 15 years of ultra-low interest rates and little concern about rising debt, it is a reminder that …
The UK voted to leave the EU in May 2016. It formally left the EU on 31 January 2020. The transition period ended on 31 January 2021. At this time, UK trade with the EU is subject to new paperwork, customs checks and import duties. The impact of Brexit has been made uncertain due to …
In 1974, the National Institute for Economic & Social Research made a report about the UK economy, concluding: “It is not often that a government finds itself confronted with a possibility of a simultaneous failure to achieve all four main policy objectives: adequate economic growth, full employment, a satisfactory balance of payments, and reasonable, stable …
In February 2022, western economies imposed sanctions on Russia in response to the invasion of Ukraine. These sanctions were wide-ranging including banning exports of many goods to Russia, freezing Russian foreign reserves and recently the EU has proposed banning Russian oil exports. In response, Russia has retaliated by cutting off gas supplies to Europe causing …
On Friday 23 September Kwasi Kwarteng the new chancellor introduced a set of tax cuts and energy price guarantees in a measure the treasury described as a ‘fiscal event.’ Yet even as he was reading out his series of unprecedented tax cuts (as share of GDP, 2nd biggest on record), markets took fright, causing the …
Interest rates are a tool of monetary policy. When the economy is overheating, the Central Bank can raise interest rates to cool demand and avoid an inflationary boom. In an ideal world, the Central Bank would make small adjustments in interest rates to fine-tune the economy and avoid booms and busts, but the situation the …
In recent weeks, the Pound Sterling has fallen – losing value against the dollar and other currencies. This year, the Pound has fallen over 16% against the dollar and 7% on a trade-weighted index. In Summary A falling Pound makes: UK imports become more expensive and UK exports more competitive. A falling Pound tends to …