26 June 2025: Starmer faces a Parliamentary showdown in five days

The Government recently announced a further delay in the completion of the High Speed Rail Link between London and Birmingham. This follows the cancellation of the lines that were to be built linking Manchester and Leeds into the scheme.

Campaigners for the scheme will be disappointed that the Government announced yesterday that they will spend upwards of £500 million on transport links for the Universal Studios Theme Park, which is being built outside Bedford. Comcast, the parent company of Universal, is in negotiations over the final scale of the overall government assistance package, which could be expanded beyond infrastructure investment.

The entertainment company, which had been considering several countries in which to build the park, announced in April that it would build the attraction on a 192-hectare (476-acre) site at the former Kempston Hardwick brickworks.

The significant government offer of financial support for the project comes amid a push by Keir Starmer and the chancellor, Rachel Reeves, to kickstart sluggish economic growth.

The approximately half a billion pounds in infrastructure spending comprises £270m in rail upgrades, including a new station at Wixams, which had originally been planned more than 20 years ago, and about £200m for road works, according to the Financial Times, which first reported the arrangement.

It's increasingly clear that Britain created a Frankenstein’s monster when it embarked on plans for a high-speed rail network linking London and the north. Once brought into being, it couldn't be controlled. HS2 goes far beyond being a troubled infrastructure mega-project:

It is now a symbol of hubris and national decline. The latest of multiple reviews and resets, and the first to be presented by the Labour government that took office last year, shows that this basic syndrome hasn’t yet changed.

The Government appears to want to “get into bed” with international brands to bolster their desire to drive the economy forward, but each announcement appears to further isolate the people who are in dire need of support.

There appears to be little sign of the rebellion over Rachel Reeves ' plans to slash the welfare budget by up to £5 billion dying down, with a showdown scheduled to take place in the House of Commons in five days. With the Prime Minister away at the NATO meeting, it was left to his Deputy, Angela Rayner, to tell MPs that there will be no change to the Government agenda and the vote on the spending plans will take place as scheduled next Tuesday.

Andrew Bailey, the Bank of England Governor, has cautioned that volatile developments in the Middle East are creating significant complications for interest rate decisions as oil prices swing dramatically.

Speaking to the House of Lords economic affairs committee, Bailey highlighted how rapidly changing events between Israel and Iran have made monetary policy particularly challenging. "It is so unpredictable at the moment that, as we saw in the last 24 hours, it can easily change overnight," Bailey told peers. Oil prices surged above $80 per barrel earlier this week following US strikes on Iranian nuclear facilities, before dropping sharply below $70 after Donald Trump announced a ceasefire.

The Prime Minister has been forced to agree to an increase in the UK’s contribution to the NATO budget, equalling 5% of national GDP by the middle of the next decade. The announcement of the increase by all the group's members will place severe strain on the members’ budgets.

Donald Trump likely used the trade deal between the UK and the U.S. as leverage to gain Starmer’s support.

The US president described the decision, taken at a summit in The Hague, as a "big win for Europe and Western civilisation".

In a joint statement, members said they were united against "profound" security challenges, singling out the "long-term threat posed by Russia" and terrorism.

NATO leaders reaffirmed their "ironclad commitment" to the principle that an attack on one NATO member would lead to a response from the full alliance. However, the statement did not include a condemnation of Russia's invasion of Ukraine, as it had a year ago.

The pound traded in a narrow range yesterday as volatility fell following the announcement of a ceasefire in the conflict between Israel and Iran, in which the U.S. played a massive role, bombing Iran’s nuclear facilities.

It reached 1.3622 and 1.3666 as traders took a breath following several weeks of frenetic action.

FOMC members are making their feelings on monetary policy clear as the pressure is being maintained for not just a cut in interest rates at next month's meeting, but a series of cuts stretching well into the new year.

Federal Reserve (Fed) Bank of Cleveland President Beth Hammack said on Tuesday that the rate policy could remain on hold for quite some time as the Fed seeks clarity.

In the interview in New York, she told reporters that she didn't see any imminent case to cut interest rates since the Fed had time to make its next decision on monetary policy.

“My colleagues and I would rather be slow and right than fast and wrong with monetary policy.”

She believes it's possible tariffs may have a one-time hit on inflation, but that’s hard to say right now. While she supported the Fed’s decision to hold rates steady at the June meeting. Fed policy is presently modestly restrictive, which is in line with the current inflation and employment data, and there is still some way to go to get inflation to 2% target, and tariffs have added uncertainty to the outlook.

Meanwhile, Neel Kashkari, the often outspoken President of the Minneapolis Fed, and an outside bet to be the next Fed Chairman, added his voice to cautionary tones from various Fed officials on Tuesday. Kashkari reaffirmed the Fed's wait-and-see stance on potential tariff impacts on inflation and the broader economy in general before making any hard decisions on moving interest rates.

He went on to say, I'm hearing from businesses, strong fundamentals and nervousness about tariffs, which have introduced a new level of complexity.

We're still above the 2% inflation target, but have made a lot of progress. As Chairman Powell has said many times, the Fed is in wait-and-see mode to get more clarity on tariff effects on inflation.

I want to get a better sense of what's really going on before we make policy changes. I don't know if dollar exceptionalism will change, and I also don't know when a lot of debt becomes too much.

President Donald Trump said he has three or four people in mind to succeed Federal Reserve Chair Jerome Powell when his term expires next year. “I know within three or four people,” Trump said Wednesday during a press conference at The Hague, where he attended the NATO summit.

“I mean, he goes out pretty soon, fortunately, because I think he’s terrible.” Trump did not name his potential replacements for the Central Banker, nor did he lay out a timeline for a decision.

Some allies of the President have pushed for Treasury Secretary Scott Bessent to get the job, according to people familiar with the matter, a notion that a senior administration official disputed. Trump has also praised former Fed governor Kevin Warsh, whom he considers to be highly thought of in the financial industry.

Powell has borne the brunt of Trump’s anger, with the president belittling him with the nickname “Too Late” and repeatedly musing about firing him, while other times saying he had no intention of doing so. Trump reiterated that threat again last week in a post on social media before concluding: “Regardless, his Term ends shortly!”

Powell said yesterday that the US central bank is still struggling to determine the impact of tariffs on consumer prices.“The question is, who’s going to pay for the tariffs?” Powell said in response to a question during his testimony before the Senate Banking Committee. “How much of it does show up in inflation. And honestly, it’s very hard to predict that in advance.”

The dollar index has regained a little composure following a fall after the announcement of a ceasefire in the Middle East. Yesterday, it traded between 98.18 and 97.15.

The ECB is flawed, possibly fatally so, in how it manages monetary policy. It has been battling inflation for a considerable time and has just seen it reach its 2% target, but on the journey, it left rates too high for too long, leading the economy into a recession.

Inflation and economic activity are two sides of the same coin, and treating them separately will always lead to difficulties, as has been seen recently.

Governing Council Members have been blinkered in their approach to monetary policy, looking only at inflation, which rose as a natural reaction to the level of support that was pumped into the individual Eurozone economies and the region as a whole, post pandemic. This coincided with the Russian invasion of Ukraine and the consequent rise in energy prices, all of which drove inflation close to double figures.

The reaction of the ECB was a great deal of hand-wringing and increasing interest rates, even though it was clear that inflation would fall naturally as these phenomena faded.

Over the past year, interest rates have been driven down as the gas price has fallen, while the post-pandemic support has been removed.

The problem with having a Central Bank with only one tool at its disposal is that its policies take on the features of a blunt instrument.

Christine Lagarde and her colleagues have been loath to cut rates by more than the now customary twenty-five basis points at a time for fear of reigniting inflation, which by some miracle, mostly due to currency strength over the past three months, has now reached the 2% target.

The fear now is that inflation will fall significantly below the target, with the forecast for 2026 being that it will average 1.6%. Having been close to 10% not so very long ago, the long-term average is still well above the target.

Further cuts have been called for, which will help economic activity to rebound, but it has not happened so far. There are several possible reasons that the economy will flourish in the future, but as is being seen in the UK currently, voters are impatient and will not go for “jam tomorrow” promises.

Business activity in the eurozone was up marginally in June, marking the sixth consecutive month of expansion. Albeit at a slow, sluggish pace.

The Eurozone economy is struggling to gain momentum. For six months now, growth has been minimal, with the services sector stagnating and manufacturing output rising only marginally, according to Hamburg Commercial Bank, which compiles the activity survey.

Germany is showing cautious signs of improvement, but in France, the next largest economy, there have been no gains seen for more than six months as the country is riven by political disharmony while its President grapples with proposed changes to the retirement age.

The Euro has seen a significant advance due almost entirely to the uncertainty which surrounds the dollar currently. Yesterday, it reached a high of 1.1685 and continues to be well-supported.

Have a great day!