20 March 2026: Britain should rejoin the EU, says Sadiq Khan

There is a growing sense that the Senior Labour Party members believe the only way to ensure a reasonable level of economic growth is to reverse several crucial aspects of Brexit.

The Chancellor has been clear about her disappointment at the country's vote to leave the EU. At the same time, yesterday, the London Mayor, Sadiq Khan, told reporters that he believes that Labour should make reversing Brexit a cornerstone of its campaign to be re-elected at the next General Election.

Khan said rejoining the bloc is "inevitable" and suggested, but did not explicitly say, that the UK could rejoin without another referendum.

"I see daily the damage Brexit has done to not just London, but Londoners, the damage economically, socially and culturally," he said, adding also that US tariffs and the war in Iran have worsened the cost of living.

He said: "The facts have changed. The evidence has changed”..

"I think it's inevitable, the direction of travel at some stage we're going to rejoin the European Union."

Prime Minister Keir Starmer's spokesperson told reporters that the government's manifesto promises not to unpick Brexit "still stand."

The Labour mayor of London had told the Italian newspaper La Repubblica that the U.K. should seek to rejoin the EU's customs union and single market "during this parliament" and then push to rejoin the bloc wholesale.

Khan is the most senior Labour figure to go this far, with the issue still considered a political hot potato in Westminster.

Yesterday’s meeting of the Bank of England’s Monetary Policy Committee voted unanimously to leave interest rates unchanged.

The US-Israel conflict with Iran has caused a significant rise in global energy prices, which is pushing up fuel costs and could lead to higher household energy bills, the MPC warned.

It had therefore decided to keep interest rates the same while policymakers assess developments in the Middle East.

However, the MPC indicated that if the conflict continues and significantly affects UK prices, it would need to adopt a “more restrictive policy stance”, implying higher interest rates to curb inflation.

Financial markets are getting ahead of themselves in expecting interest rate rises from the Bank of England, Governor Andrew Bailey said after the meeting, as rate-hike expectations rose sharply following the central bank's decision to hold rates.

"I would ​caution against reaching any strong conclusions about us ​raising interest rates. Today, we've given a very ⁠clear message. The right place to be is ​on hold," Bailey said in an interview conducted with British broadcasters.

Financial markets were pricing in two quarter-point interest rate rises over the course of ​this year, reflecting an overnight surge in energy prices and the BoE's statement that it no longer saw scope ‌to ⁠cut rates in the immediate future.

Bailey stated that the BoE's change in stance should not be over-interpreted.

None of us knows how this is going to play out. I think, therefore, the appropriate thing is to hold rates at this point. That, of course, is a change in the stance," he said.

I don't think it's appropriate to say at this point, given the uncertainty about whether we'll raise rates or hold them afterwards. Frankly, we're going to ​have to review this very carefully, on an ongoing basis,

Bailey was clear that the most effective way to reduce oil and gas prices was to reopen the Strait of Hormuz, although he stopped short of suggesting that the UK participate in any operation to achieve this goal.

Sterling rallied significantly as the market began to see cracks in the joint U.S./Israel offensive. Trump told reporters that he told Israel’s Prime Minister that he should not attack Iran's oil and gas infrastructure, as rumours spread that the two leaders disagree on the prime objective for the conflict.

The pound reached a high of 1.3467 and closed at 1.3431.

The International Monetary Fund announced yesterday that it is revising a recent review of the US economy to account for the effects of the war in Iran, Reuters reported. IMF spokeswoman Julie Kozack stated that the IMF's board would review the updated assessment in the coming weeks before being published.

While the global lender has not received any formal requests for emergency funding, it remains prepared to assist member countries. Kozack mentioned that IMF officials are engaging with finance ministers and Central Bank officials from member nations, as well as regional institutions.

She noted that the war's impact would depend on its duration, intensity, and scope. The IMF plans to incorporate the war's effects into an updated global economic outlook set to be released in mid-April during the IMF-World Bank spring meetings.

“Oil and gas prices, as you know, have increased by more than 50% over the last month, to over $100 a barrel for Brent. Additionally, fertilizer shipments have faced disruptions, and this, together with transportation issues, raises the risk of significant increases in food prices, which could be substantial again, depending on the duration and intensity," she said.

Fed Chairman Jerome Powell, speaking after the Central Bank had left rates unchanged, agreed with Kozack’s sentiments, telling reporters, “We simply don’t know enough about how the situation in Iran will unfold.

But as he spoke during his penultimate press conference, the Federal Reserve Chair repeatedly returned to a more unsettling theme: no one, not even the Fed, knows what comes next.

He took advantage of reporters’ questions to take a wide view on the economy over the last six years, calling the economy’s resilience through years of overlapping crises “amazing to see”, even as he noted the Fed is still navigating one of its trickiest moments in decades.

Trump’s longstanding view on interest rates is that they should have been cut well below the current target range of 3.5%-3.75%. He also wants Powell to be replaced. Neither outcome seems likely soon.

Powell has linked any further interest rate cuts to evidence that the inflationary effects of Trump’s tariff increases have passed, and that’s before considering the impact of the US-Israeli conflict against Iran, which has driven energy prices higher.

The Fed’s preferred core inflation measure was estimated at 3% last month, according to Powell, a full percentage point above the 2% target.

This is mainly due to import duties, which should decline “in the middle parts of the year.” “So if we don’t see that progress, then you won’t see the rate cut,” Powell stated.

He added, “We have to be humble about knowing how long it will take for tariffs to work their way through the economy,” noting that the COVID inflation shock took two years longer to subside than the Fed anticipated. Regarding the effects of the Iran conflict, “we’re right at the beginning,” so the Fed’s role is just to watch and wait.”

Since he was threatened with legal action by the administration in January, Powell has taken on a far more “punchy” persona. He is no longer content to stay in the shadows and allow Trump to take pot shots at him, and is giving as good as he gets, even as he knows that his days as Fed Chair are numbered.

The dollar index plunged yesterday as the war in Iran saw a significant escalation with Israel attacking Iran’s largest gas refinery. It fell to a low of 98.98 and closed at 99.18.

The ECB’s Governing Council has clearly decided at its meeting, which concluded yesterday, that it “won’t die wondering” about the inflationary effect of the recent rise in energy prices as it did following the aftermath of the COVID-19 pandemic.

European Central Bank policymakers are prepared to raise interest rates at their next meeting if the fallout from the war in Iran pushes inflation significantly above target.

Although no decision has been made yet and a later date might be more suitable, signs of second-round effects could prompt such a move at the gathering on 29-30 April.

April’s decision will not include updated forecasts, which may discourage some officials from committing to policy actions. Some delegates, therefore, proposed June as a more probable time to raise borrowing costs.

While the ECB claims to be “driven by the data”, unless the Straits of Hormuz are reopened urgently or the war in Iran ends abruptly, neither of which currently appears likely, inflation will rise significantly over the coming months.

President Christine Lagarde said she and her colleagues are well placed to address the growing dangers posed by the conflict in the Middle East.

Traders increased wagers on an April hike after the meeting. Money-market pricing implied a roughly 60% probability of a quarter-point rise, versus about 50% before the meeting.

Markets reckon officials in Frankfurt will react as attacks in the Gulf send energy costs soaring and threaten to disrupt supply routes more broadly. They’re fully pricing at least two quarter-point increases this year.

A new quarterly outlook, based on inputs running until 11 March to account for the start of the war, indicated an inflation rate of 2.6% in 2026, well above the 2% target but not enough to justify two rate increases.

A severe scenario for how events in Iran could unfold suggests that price gains might peak at 6.3% in the first quarter of 2027, and that the economy could face a brief recession in 2026, according to the ECB. Such an outcome, which assumes no monetary or fiscal response, would stem from severe energy supply disruptions persisting until late 2026 and substantial further destruction of energy infrastructure, among other factors.

The euro rallied as the dollar declined yesterday. It reached a high of 1.1616 and closed at 1.1588.

Have a great day!