### Summary
The UK is experiencing mixed economic news, with wage increases, falling inflation, and lower food prices, but core inflation remains high. The Bank of England is expected to raise interest rates in September. Meanwhile, the government is providing support payments to eligible households, and usual state benefits will be paid in September. The Energy Price Guarantee has expired, and consumers will now pay the Energy Price Cap rate, which has decreased but is still higher than pre-pandemic levels.
### Facts
- 💰 The UK saw wage increases, falling inflation (excluding volatile food and energy prices), and lower food prices in mid-August.
- 💸 Core inflation remains high at 6.9%, indicating that any economic gains may be offset by higher borrowing costs.
- 🏦 The Bank of England is likely to raise interest rates from 5.25% to 5.5% in September to address high inflation.
- 💷 The government is providing support payments to eligible households, including means-tested benefits claimants, people with disabilities, and pensioners.
- 💳 Usual state benefits and pension payments will be delivered as normal in September with no bank holidays.
- 💡 The Energy Price Guarantee has expired, and consumers will now pay the Energy Price Cap rate, which has decreased to £2,074 for Q3 2023.
- ⬇️ Wholesale energy prices have dropped, leading consultancy firm Cornwall Insight to predict further decreases in October. However, prices are expected to remain above pre-pandemic levels for the foreseeable future due to geopolitical incidents and the UK's reliance on energy imports.
Government borrowing in the UK was lower than expected in July, sparking speculation about possible tax cuts later this year, however, analysts warn that the Chancellor may have little room for such cuts due to weakening economic forecasts and increasing interest rates.
The Bank of England may have to increase interest rates if the US Federal Reserve decides to raise rates to cut inflation, in order to prevent the pound from weakening and inflation from rising further.
Surging interest rates in the UK have led to a slump in factory output, the biggest annual drop in house prices since the global financial crisis, and signals of distress in different sectors of the economy, posing a dilemma for the Bank of England as it decides whether to raise interest rates further.
British finance minister Jeremy Hunt has stated that inflation is expected to halve by the end of 2023, with the goal of easing pressure on household budgets and increasing productivity, as the government aims to boost optimism about the economy ahead of the expected elections next year.
Chancellor Jeremy Hunt is confident that his plan to reduce inflation in the UK is working and will alleviate financial strain on households, despite criticism from experts and opposition politicians. He believes that sticking to the plan and reducing inflation will ease the pressure on families and businesses and lead to economic growth. However, some Conservative colleagues may disagree with his focus on public sector productivity rather than tax cuts. Labour's shadow chancellor, Rachel Reeves, criticized Hunt for being out of touch with the economic realities faced by families and called for investment in the economy to benefit working people.
Rishi Sunak has not ruled out a cut to benefit payments in order to fund a tax cut before the next election, despite warnings from experts that it would be "morally bankrupt and economically illiterate." There is speculation that Chancellor Jeremy Hunt's upcoming Budget in November may include a real-terms pay cut for benefit claimants to finance pre-election tax cuts, although the government did not deny this possibility. Tories are pressuring Sunak to offer a tax cut in the next spring's Budget, but the Chancellor is facing financial constraints. Experts and anti-poverty charities have expressed concerns over cutting benefits, especially considering the current cost of living crisis and the upcoming winter.
The Bank of England may raise interest rates to 5.5% this autumn due to inflation remaining above target, potentially putting further financial strain on homeowners, while households on low incomes will receive cost of living support payments from the government totaling up to £1,350 this year, and the Energy Price Cap has dropped again to £1,923 for the final quarter of the year.
Inflation in Britain slowed for a third consecutive month in August, defying expectations of a rise due to higher fuel prices, with consumer prices rising 6.7 percent compared to the previous year, driven by slower increases in food prices and a decline in hotel room costs. Core inflation also fell more than anticipated, indicating a potential easing of inflationary pressures, though price growth remains uncomfortably high. The Bank of England is set to announce its decision on interest rates, with growing speculation that rates may be held steady due to signs of slowing inflation and a weak economy.
The Bank of England has ended its streak of interest rate hikes after new data reveals lower-than-expected inflation, signaling a potential pause in the rate hiking cycle. The Bank's Monetary Policy Committee also voted to cut its stock of U.K. government bond purchases, and investors are now speculating whether this decision marks the peak of the interest rate cycle.
The Bank of England has paused its interest rate hike campaign and kept the borrowing cost at 5.25% due to unexpectedly falling inflation in August, providing relief to UK households and potentially leading to cuts in mortgage rates. The decision was a close vote and the central bank hinted that borrowing costs would need to remain high for a sustained period to ensure a fall in inflation. Despite this, many analysts expect no further rate hikes.
The Bank of England has decided to halt interest rate rises due to unexpected inflation slowdown, while housing markets in major global economies, including the US, Germany, and the UK, are showing signs of slowing down. Additionally, there have been developments in various countries' economic outlooks and key interest rates.
Hungary's central bank signals caution on further rate cuts and the government considers a new tax on banks to counteract a drop in tax revenue caused by high inflation in the European Union.
British finance minister Jeremy Hunt will announce a rise in the minimum wage and ignore calls for tax cuts in his annual Conservative party conference speech.
Chancellor Jeremy Hunt will emphasize the government's plan to make benefits sanctions stricter and raise the national living wage to over £11 per hour in a speech at the Tory conference, as pressure mounts for tax cuts and welfare changes to reduce spending and boost the economy.
UK Finance Minister Jeremy Hunt dismisses calls for tax cuts within the Conservative Party, stating that he cannot commit to any reductions before the next election due to concerns about inflation.
Britain's Treasury chief announced an increase in the national minimum wage to appease struggling workers, but ruled out tax cuts due to concerns about inflation, drawing criticism from many Conservatives at the party's conference; other inexpensive policy announcements were made in an attempt to gain voter support, but the government's spending power is limited by the slow economy and high inflation.
