4 September 2025: The Deputy PM admits wrongdoing

The Government has been hit by another drama surrounding the Deputy Prime Minister Angela Rayner, who has been forced to admit that she underpaid the stamp duty on a property she purchased earlier this year by approximately forty thousand pounds.

As is often the case in these matters, the issue is not as cut and dried since it appears Rayner apparently was given incorrect advice, and there is some doubt as to the ownership of a home in Manchester in which she used to live.

Nonetheless, a person who has risen to the level she has and is also responsible for the Government’s housing portfolio should check and double-check that she is acting correctly.

She has rightly referred herself to the Parliamentary Standards Committee, and it is expected that her political career will rest upon their findings.

At Prime Minister’s questions in the House of Commons yesterday, Sir Keir Starmer defended Rayner’s record both as an MP and a Minister, saying that he was proud to have served alongside her.

Backbench Labour MPs were split over the matter, with around half supporting the fact that she was given wrong advice in what is a difficult situation concerning her disabled son and half seeing this as the final straw in a series of embarrassing episodes.

The Chancellor of the Exchequer, Rachel Reeves, in an interview with the BBC yesterday, announced that the Autumn Budget would be delivered to MPs on the 25th of November.

This is later than usual, and it was suggested to her that she may be taking the extra time since she has several issues that she will have to get right, since she too is “skating on thin ice”.

She denied that she will have to fill in a fifty billion pound black hole in the nation’s finances, as well as saying that, since she has not begun to write the budget yet, she is at a loss to explain the rumours that have been swirling regarding property tax and other measures that may also be introduced.

She was clearly uncomfortable with this reasoning, since most of the rumours have been proven to emanate from within the Treasury, and appear to be “testing” public opinion.

The Bank of England governor warned that there is “considerably more doubt” about when the central bank will be able to cut interest rates again.

Andrew Bailey’s comments came after the Bank’s Monetary Policy Committee cut the interest rate by a quarter point to 4% last month.

The reduction brings the interest rate down to its lowest level since March 2023 and was the third cut by rate-setters this year and the fifth since last August.

But Bailey, giving evidence to parliament’s Treasury Select Committee as part of the Bank’s annual report to MPs, sounded a note of caution on further cuts.

The governor said: “Although we’ve taken a further step, and although I think that the path will continue to be downwards, gradually over time, because policy is still restrictive…. There is now considerably more doubt about exactly when and how quickly we can make those further steps.

The pound regained its poise as it recovered from losses that came as it was announced that rates on 30-year Government bonds have risen to their highest level in 28 years. It rallied to a high of 1.3458 and closed at 1.3444.

Fed Governor Christopher Waller, one of the members of the rate-setting FOMC who was appointed at the suggestion of President Trump and is a candidate to take over the Central Bank’s Chairmanship when Jerome Powell eventually leaves, spoke yesterday of his view that the current Fed Finds rate is between 1% and 1.5% above what he considered to be the “neutral” rate.

He went on to voice his support for starting a rate-cutting cycle in two weeks, and said the Central Bank has the flexibility to adjust that pace in the future.

“When the labour market turns bad, it turns bad fast. So for me, I think we need to start cutting rates at the next meeting,” Waller said in an interview on CNBC. “We don’t have to go into a lock sequence of steps. We can kind of see where things are going because people are still worried about tariff inflation. I’m not, but everybody else is.”

These comments could just as easily have come straight from the mouth of the President.

Recent FOMC meeting minutes have seen the Fed wishing to proceed cautiously while staying prepared to cut rates, should Waller’s fears be realized.

It has been the nature of Powell's time as Chairman that the Fed proceeds in a reactive vein, studying both data and market sentiment before deciding on any changes to monetary policy.

Waller acknowledged that tariffs are a tax on the consumer that will slow growth, but he doesn’t see a recession in his economic forecast.

The Fed’s next policy meeting is scheduled for Sept. 16- 17.

Waller declined to comment on Trump’s attempt to fire fellow Federal Reserve Governor Lisa Cook. But he reiterated the importance of Fed independence and said the Central Bank will maintain its independence, whoever assumes leadership.

“The independence of the Fed is critical for everything we do, and there are things that are going on that make people worried, but I still believe that we have an independent Fed,” Waller said. “People who are appointed will behave that way and act in an apolitical fashion.”

St. Louis Federal Reserve president Alberto Musalem, who sits on the “hawkish side of the FOMC, said yesterday that he expects the job market to cool gradually and downplayed long-term concerns about inflation, an evolving stance that could open the door for support for rate cuts this Autumn.

"With the pace of hiring low, any increase in layoffs could produce a more substantial labour market weakening than would occur in a more active market," Musalem said in a speech.

"While I am not hearing from businesses about an imminent increase in layoffs, real GDP growth that is somewhat below potential and profit margin pressures related to tariffs could contribute to such an outcome," he said.

Musalem appeared less concerned than he normally is in his speech about inflation, saying he expects the effects from tariffs will work through the economy over the next two to three quarters and that the "impact on inflation will fade after that."

These comments seem to mark a shift in emphasis away from inflation and more towards the slowdown in hiring that has been seen over the past three or four months.

The dollar index lost ground again yesterday. It seems unable to build a solid basis to move higher, with volatility returning to the market. It fell to a low of 98.92 and closed at 98.15.

The market appears to have been spooked by the minimal rise in inflation in August, which appears to have been within the bounds of “normal” activity. The rise from 2.2% to 2.3% has provided the hawks on the ECB’s Governing Council with ammunition to caution against a rate cut later this month.

“The ECB should keep interest rates steady as the economy is holding its own in the face of tariffs on its exports to the U.S., particularly with inflation coming in at above expectations”, ECB Executive Board member and resident hawk Isabel Schnabel commented yesterday.

She cautioned that price increases could surpass projections in the coming months, driven in part by trade-related fears.

This is the kind of conjecture that has forced the ECB to leave rates unchanged when the market was “crying out “for rate cuts to begin. Schnabel said that rates may already be in a mildly accommodative state, and she does not see the reason for a further rate cut at this juncture.

Schnabel also dismissed concerns that a stronger Euro might weigh heavily on price dynamics. She said currency appreciation tied to improving Eurozone growth prospects would have a more limited pass-through, adding, “I am less concerned about exchange rate developments.” She stressed that she sees little chance of inflation expectations de-anchoring to the downside after years of price overshoots.

While she may be less concerned about currency movements than several of her colleagues, she is ignoring the fact that the Euro’s current relative strength belies that the Eurozone economy is growing at a rate that is below optimum.

Looking forward, Schnabel warned that a more fragmented world with tighter supply chains, higher fiscal spending, and ageing populations is structurally inflationary. In such an environment, she argued, “central banks around the world start to hike interest rates again may come earlier than many people currently think.”

The Euro rallied to a high of 1.1682 following Schnabel’s comments, closing at 1.1660.

Have a great day!