12 February 2026: Reeves shrugs off the student debt crisis, claiming loans are ‘designed not be paid back’

Rachel Reeves has signalled that Labour will push further and harder on reversing the worst aspects of Brexit, claiming that closer integration with the EU is the “big prize”.

The Chancellor, who was part of the campaign for a second referendum to stop Brexit, told an audience at the LSE yesterday that the UK needs to be more closely integrated with one of the bigger blocs in a turbulent world.

She said that while relationships with the US and China are important, neither is more important than the “one on our doorstep”, signalling plans to go much further than last year’s reset in relations with Brussels, unveiled by Prime Minister Sir Keir Starmer.

Reeves said: “A closer economic relationship with the EU isn’t about choosing sides but about geography.

“There are three big economic blocks: the US, China and Europe. We will always seek every opportunity to grow our economy and these trading relationships, but ultimately, only one of these is on our doorstep. So the biggest prize is closer integration with Europe.”

It comes days after Labour London mayor Sir Sadiq Khan described reversing Brexit as the “ultimate goal”. At the same time, both the Chancellor and Prime Minister have made it clear Brexit will be a dividing line with Nigel Farage’s Reform UK at the next election.

Prime Minister’s Questions every Wednesday in the House of Commons has long been one of the more entertaining features of Parliamentary life, and the present cast does not disappoint.

Yesterday, after a week in which he apparently escaped being removed from his job by the “skin of his teeth”, Sir Keir Starmer had a difficult repelling both Kemi Badenoch and Lib Dem leader Sir Ed Davy.

The issues facing the Prime Minister have widened from specific questions about individual matters to a questioning of his entire decision-making process. His Judgement is being called into question on an almost daily basis, and it is only because any potential challengers for the leadership appear to be biding their time.

It is obvious in politics, as in many other professions, that once you reach the top job, there is only one direction that one’s career can travel, and this is “south”. The trick, which Starmer is yet to learn, is to deflect as much criticism as possible, although he appears to be determined to hang on for as long as possible.

Later today, a raft of economic data will be published, which may well shift the focus from Starmer to his Chancellor.

Monthly and quarterly GDP numbers, industrial and manufacturing output and trade figures will turn the spotlight back to the economy. It is expected to have grown by 0.1% in December, down from 0.s% in November. Hardly a sparkling performance, although Reeves is certain to hail the data as a sign that her measures are still working. The annualised quarterly number will show that the economy grew on an annualised basis by 1.2%, down from 1.3% a month earlier.

The pound will struggle since the data provides further evidence for a rate cut at next month’s MPC meeting. Yesterday, it initially rallied to a high of 1.3712 but ran into strong selling pressure, which drove it back to close at 1.3621.

Jeffrey Schmid, President of the Federal Reserve Bank of Kansas, is not a voting member of the FOMC in 2026, but his comments on monetary policy often offer greater insight than those of some of his colleagues who do vote. All twelve regional Presidents attend the six-weekly meetings and are entitled to comment during proceedings and often influence the committee.

Schmid said yesterday that the US Central Bank should hold rates at a “somewhat restrictive” level, as he expressed continued concerns over inflation that remains too high.

“In my view, further rate cuts risk allowing high inflation to persist even longer,” Schmid said yesterday in prepared remarks for an event in Albuquerque, New Mexico.

He added that interest rates should still be putting some pressure on the economy, but that may not be the case.

He went on to say that “With growth showing momentum and inflation still hot, I’m not seeing many indications of economic restraint”.

Schmid said continued price pressures show demand is outpacing supply in much of the economy. While innovations such as artificial intelligence may eventually drive productivity growth higher, allowing the economy to expand without driving inflation up, “we are not there yet,” he said.

Schmid’s remarks came shortly after government data showed US payrolls rose in January by the most in more than a year and the unemployment rate unexpectedly fell to 4.3%. The economy added 130,000 jobs in January, according to a highly anticipated labour market report released on Wednesday, marking a surge of job growth after months of labour market fatigue.

The unemployment rate, at 4.3% in January, showed a slight cooling since the Autumn. Economists had predicted 70,000 job gains and an unchanged unemployment rate for January.

The gains are still 13,000 jobs short of the 143,000 added a year ago, but more than double the 50,000 added in December.

The Kansas City Fed chief acknowledged strong growth in 2025 and said the economy is entering 2026 with “considerable momentum.”

Later, Cleveland Fed President Beth Hammack, who has already voiced her opposition to additional rate cuts, said the labour market appeared to be finding a “healthy balance.”

The strong jobs report, however, wasn't convincing to Fed Governor Stephen Miran, a Trump appointee who has called for continued reductions in the Fed’s benchmark rate. He said there are still “a variety of reasons why I want to see lower interest rates,” pointing to falling housing inflation and boosts to the economy in 2026 from supply-side factors, such as reduced regulation.

Addressing the balance sheet, Schmid repeated his view that the composition of the Fed’s Treasury holdings should mirror the overall market. By concentrating new purchases in Treasury bills, he said, the Fed is moving in this direction. Shifting the balance sheet to a more market-neutral position will also ensure that the Fed remains independent, he said.

The dollar index saw considerable volatility but ended the day close to its opening level. It traded between 97.27 and 96.49, eventually closing at 96.92.

ECB Board and Governing Council Member appears to have reduced the number of interviews she gives over the past three months, but reporters are always willing to listen intently to what she has to say.

Yesterday, she veered off her usual topic of the dangers of inflation to discuss what the economy needs to do to retain its newfound strength.

She agreed that Europe has what it takes to build a thriving economy, but it must step up efforts to implement reforms and embrace change.

The continent is neither lacking ideas nor talent, and is one of the few regions in the world where democracy and the rule of law remain firmly entrenched, Schnabel said in a speech in Vienna. What’s needed is scale and courage to strengthen its economy.

“Europe is a continent with huge potential,” Schnabel said. “The picture in Europe should be one of optimism, not because the challenges are small, but because Europe has the capacity and the tools to meet them.”

She added that “the key is to unlock the full potential of the single market, one of Europe’s most powerful assets.”

Schnabel’s remarks build on an op-ed piece in the Financial Times earlier yesterday, in which she argued that the often-used description of Europe as a “continent in decline” is misleading. In fact, “by many measures, Europe is among the regions with the highest quality of life,” she wrote.

Still, its economy has been struggling to cope with shifting geopolitical tides that brought trade levies, supply snarls and energy woes. Weak manufacturing is still holding back growth, with hope resting on defence and infrastructure spending to fuel demand.

European Union leaders are meeting later today to discuss strategies to gain economic weight and become more independent from the US and China. In the run-up, ECB officials, including President Christine Lagarde, have leaned on them to be bold in raising competitiveness.

Lagarde called on EU leaders to take urgent action in critical areas, including potentially divisive joint debt issuance, to make the bloc more resilient in turbulent times, a source told Reuters.

Lagarde hopes to kickstart a timid reform process at an EU summit this week as the bloc comes under pressure from unpredictable U.S. policy and China's encroachment into its traditional export markets.

Last week, the ECB demanded “urgent collective action” and outlined five key measures in a checklist sent to heads of state. They included a savings and investment union, a digital euro, a deepening of the single market, policies to foster innovation, and simpler legislation.

The Head of Germany's Central Bank, Joachim Nagel, has called for the EU to issue more joint debt, putting him at odds with Chancellor Friedrich Merz, who wants to keep the measure strictly for emergencies.

“To make Europe attractive also means to attract investors from outside,” the German central bank governor, Joachim Nagel, told reporters ahead of the informal summit of EU leaders, which begins later today, to address the bloc’s economic challenges. “A more liquid European market when it comes to safe European assets would support that.”

The euro has settled back into its more common range, having recently flirted with the 1.20 level, which appears to be the point at which the ECB begins to show concern about its “undesirable” strength.

Yesterday, the single currency fell to a low of 1.1833 but recovered to close at 1.1870.

Have a great day!