19 June 2026: Is this the beginning of the end for Starmer?

Andy Burnham is now the former Mayor of Greater Manchester as he stormed to victory in the Makerfield by-election with a majority of more than 9,000.

“Everyone knows that politics isn’t working,” Burnham said in his victory speech.

“Everyone can feel that the country isn’t where it should be. Tonight could, just could, be the turning point. From here on, I will give everything I have to make that happen and ensure the name Makerfield is forever synonymous with bringing about the change this country needs.”

Burnham’s victory is likely to precipitate Starmer’s resignation or trigger a leadership contest pitting the Prime Minister against the outgoing Mayor and Wes Streeting, the former health secretary, among other candidates.

If he succeeds Starmer, Burnham, who was the early favourite in the 2015 Labour leadership race before coming second to Jeremy Corbyn, would be the UK’s seventh prime minister since the country voted for Brexit in 2016.

After leading Labour to a thumping election victory in 2024, Starmer has been under mounting pressure to step down amid widespread public dissatisfaction with his leadership and a set of abysmal results in May’s local elections.

Twenty ministers have resigned from Starmer’s government in less than two years, nearly half of whom expressed a loss of confidence in his leadership or clashed with him on policy, including Streeting.

Starmer has rebuffed calls to resign, pledging to fight any challenge to his leadership and insisting that such a contest would be a “bad thing for the country”.

Burnham, dubbed the “king of the north” for his grassroots appeal and his willingness to challenge Westminster, ran on the promise to “change Labour” to “change politics and change the country”.

The Bank of England (BoE) left interest rates unchanged after May’s inflation came in milder than expected.

The Central Bank kept its key rate at 3.75% following the latest meeting of its Monetary Policy Committee and slightly trimmed its peak inflation estimate to 3.25% from 3.3%.

It makes sense that the BoE is optimistic. Oil prices are down on the hope that the peace deal between the US and Iran will hold, and inflation came in at a more palatable 2.8% in May, below the 3% forecast, helped by cooling food prices and cheaper home-heating oil.

Traders are still predicting a hike later this year, but that’s better than the two or even three they were expecting before.

The Bank's Monetary Policy Committee voted 7-2 to keep rates on hold, in line with economists' expectations in a Reuters poll, after external member Megan Greene joined Chief Economist Huw Pill in calling for a quarter-point rate rise.

Most other MPC members appeared closer to raising borrowing costs, broadly sticking with what Bailey calls an "active hold", which he views as an effective tightening compared with market expectations of cuts before the conflict.

The BoE's approach contrasts with that of the European Central Bank and the Bank of Japan, both of which have raised rates in the past week, and with projections from the U.S. Federal Reserve after its first meeting under new chair Kevin Warsh, which showed policymakers expected rates to rise later this year.

Sterling weakened against the dollar after the decision, extending sharp losses following Wednesday's Fed decision to hit its lowest level since April 7, while markets still do not fully price in a BoE rate hike until December.

Yesterday, it fell further to a low of 1.3193 versus the dollar and 1.1517 versus the Euro, closing at 1.3205 and 1.1525.

Less than four weeks after being sworn in as chairman of the Federal Reserve, Kevin Warsh left no doubt that the way the Central Bank shapes its policies and communicates will be markedly different from the past 15 years.

Warsh is already acting on his longstanding view that the Fed has been over-explaining, over-signalling, and overly focused on fine-tuning the economy for years. Investors will need to wrap their heads around this new regime quickly.

Forward guidance and detailed descriptions of how the Central Bank is interpreting incoming data have been abandoned in favour of simpler policy statements, tighter (and maybe fewer) press conferences, little guidance on what comes next, and task forces to rethink broader aspects of how the Fed works.

Several members of the FOMC, which comprises seven permanent board members and twelve regional Fed presidents who serve in rotation, will feel that their wings have been clipped. At the same time, markets have long appreciated their comments.

In new projections released alongside yesterday's policy statement, 9 out of 18 top Fed officials indicated that at least one interest rate increase would be appropriate this year. That was enough to drive stocks down and bond yields up.

Warsh, consistent with his long critique of that forecasting exercise, didn't submit one of his own. In his news conference, he also declined to spell out the likelihood of a rate hike this year, how he interprets incoming inflation data, or what economic developments would prompt a rate increase.

The U.S. and Iran have signed an interim deal to end the war, but the hard part now begins. The agreement establishes an immediate and permanent ceasefire, reopens the Strait of Hormuz, and launches a 60-day negotiation window to resolve deeper disputes, yet several major obstacles remain.

Under the agreement, both sides have committed to a ceasefire on all fronts, including Lebanon, where Israeli–Iranian tensions remain high. It also provides for the immediate reopening of the Strait of Hormuz and the lifting of the U.S. naval blockade, restoring global energy flows. A framework for broader talks on sanctions, Iran’s nuclear programme, frozen assets, and regional security is also included.

Even with the ceasefire agreed, the deal is fragile. Several sticking points could derail the next phase: Iran insists the war cannot be considered over while Israeli forces remain in Southern Lebanon. Israel says it will not pull back. This is the single biggest obstacle to a durable settlement.

Iran’s Supreme Leader approved the deal reluctantly, warning negotiators not to accept any new U.S. conditions. Tehran says it will monitor U.S. compliance “without leniency.” It is not hard to imagine his hatred for the U.S., given that his family were slaughtered in the first days of the war.

The draft of the agreement only sets the stage for talks. Iran says its missile programme is off the table, while it will not ship enriched uranium abroad, positions that will complicate negotiations.

U.S. hawks and Israeli officials have condemned the agreement as a “catastrophic capitulation,” weakening Trump’s leverage heading into the next phase.

The Philly Fed business index unexpectedly returned to expansion this month, rising 10.7 points to 10.3, slightly stronger than economists predicted.

The positive reading was supported by solid increases in new orders and shipments, and by improved employment.

The prices paid component, an inflation predictor, heated up, and survey participants expect it to rise further in the near term.

Combined with Monday's Empire State index, Atlantic region factory activity is chugging along at a modest pace in June.

The Conference Board's Leading Economic Index improved by a nominal 0.1% in May, as expected, marking a partial rebound that builds on April's upwardly revised 0.2% gain.

The index is an amalgamation of 10 forward-looking economic indicators, including initial jobless claims, ISM new orders, building permits, yield spreads and S&P 500 price performance.

The dollar index built on its gains after the FOMC meeting, reaching a high of 100.95. It then fell marginally, closing at 100.83.

The European Central Bank's chief economist, Philip Lane, said yesterday that the Eurozone's economy may now be able to withstand slightly higher interest rates without losing steam. A cynic might argue that the economy is weakening to such a degree that one of two rate increases will make little difference.

Lane said the upper end of the neutral range for the ECB's benchmark rate, which neither stimulates nor curbs growth, has risen from 2.25% to 2.50% based on bond market prices.

"I would view our calculations of neutral as relevant for the endpoint when the shock is over," Lane told an audience at an event in London. "We look at a range of models of neutral, and the upper end of that range we think has crept up from 2.25 to 2.50."

The ECB raised its benchmark deposit rate to 2.25% from 2% last week and left the door open to further tightening to prevent a surge in fuel costs caused by the war in Iran from spreading to other prices.

Bond yields have risen sharply in the region since Germany unveiled plans to spend more on the military and infrastructure last winter.

Yesterday, Germany's Ifo Institute cut its economic growth forecast for next year to 0.8%, down from the 1.2% expected in March, as prices are set to remain higher despite a preliminary agreement to end the conflict in Iran.

However, Ifo maintained its 0.8% growth forecast for this year, supported by expansive fiscal policy and higher public spending on infrastructure, climate neutrality and defence.

The recovery that began last year will pause in the second quarter, as the Government's expansionary fiscal policy is offset by the energy price shock caused by the U.S.-Israeli war on Iran, Ifo chief economist Timo Wollmershaeuser said.

According to Ifo, the Government's additional spending is expected to boost the economy by 0.5 percentage points this year and next, while the energy shock will slow growth by 0.4 points.

"Starting in the third quarter of 2026, the recovery is likely to resume and accelerate towards the end of the year, provided the conflict in the Middle East does indeed ease," Wollmershaeuser added.

The institute assumes the Middle East conflict will be resolved in the coming weeks and that energy prices will gradually fall. Still, it warned that the forecast carries "considerable downside risks" if the conflict flares up again.

Inflation is expected to rise to 2.9% this year and then ease to 2.7% in 2027, above Ifo's previous forecast, as higher oil prices feed through to goods and services.

Long-term prospects remain weak, Ifo said, with potential growth expected to fall to just 0.1% by the end of the decade due to demographic pressures and weak productivity growth.

The single currency continued on its downward path yesterday. It fell to a low of 1.1451 and closed at 1.1457.

Have a great day!