17 August 2026: Starmer allies warn John Healey against blowing ‘strong’ economic inheritance

The next meeting of the Bank of England’s Monetary Policy Committee takes place one month from today.

The three most hawkish members of the Committee, Huw Pill, Catherine Mann and Megan Greene, are expected to vote for a hike, and they will need to persuade two further members to change their minds for their wishes to be granted.

The most likely candidates are Clare Lombardelli, Dave Ramsden and Sarah Breedon. These three are permanent members of the Committee and are considered ‘neutral’ in their outlook. Alan Taylor and Swati Dhingra are considered to be the most ‘dovish’ members of the MPC.

The ninth member is the bank’s Governor Andrew Bailey, who remains the most neutral and has been the ‘casting vote’ several times in the past.

Pill was the ‘first cab off the rank’ following the publication of growth data for both the second quarter and last month. He told the Wall Street Journal that stronger-than-expected British economic growth figures reinforced the case for higher borrowing costs to bring inflation back to target.

Pill, who was outvoted in a 6-3 decision by the BoE's Monetary Policy Committee to keep interest rates unchanged at the MPC's July meeting, said data showing the British economy grew 0.4% in the second quarter suggested the country was not heading into a sharp downturn.

"We’ve had 59 months of GDP data in my time as a member of the MPC, of which three months have been at or below target," he added. This makes me believe that inflation is a bigger concern than growth. Over the same period, inflation has only been below the Bank’s 2% target once. That was in June 2024, when it briefly reached 1.9%.

The Budget is now a little over two months away. This will test John Healey’s mettle as Chancellor of the Exchequer while marking the end of Andy Burnham’s elongated honeymoon period as Prime Minister.

After last year's debacle, when the full contents of Rachel Reeves’ measures were published online before she even stood up in the Commons to announce them, Healey is trying to ensure it doesn't happen again this year.

He has introduced a new high-security, leak-proof Budget IT system and a strict access-control regime to prevent leaks of this year’s Budget. These measures are drawn directly from the Treasury’s Budget Information Security Review and are being implemented ahead of the 28 October 2026 Budget. Designed so that Budget documents cannot be sent, printed, or downloaded across departmental boundaries. It also logs and tracks every person who accesses Budget files.

It's been a tough few years for British farmers. Not only have they had to contend with changes to inheritance tax, which have led to many farms being broken up and sold, but they have also faced severe drought over the past two years.

The government needs to win back farmers’ trust. According to media reports last week, the Prime Minister explicitly said the government has a “long way to go to build back trust with the farming community” after months of protests and policy disputes.

Burnham announced new funding to help farmers cope with drought and protect food production. The government has launched a landmark 25-year roadmap giving farmers stability “beyond the next harvest”, the most significant agricultural plan since WWII. Key elements include: long-term certainty on policy direction, including consultation; nature-based resilience; £53m extra for innovation; and seasonal worker visas guaranteed until 2030.

The farming community has largely welcomed the measures, though there are calls for them to go further, particularly on taxation.

Sterling strengthened overall last week, but the move was selective rather than a broad GBP surge. Across the major crosses, GBP gained mainly against the USD and CAD, while losing ground against JPY, ZAR and SEK.

Kevin Warsh took over as head of the Federal Reserve in May, with monetary policy at a crossroads, officials divided over whether to hike interest rates to control inflation, and President Donald Trump demanding lower rates to ​stimulate the economy.

The Fed’s response was to sit firmly on its hands despite the highest level of dissent for decades.

Recent data may have set the U.S. Central Bank up for an extended do-nothing stance.

The labour market is not booming. Wages have declined over the last six months on an inflation-adjusted basis, and job growth has been ‌ anaemic at best, yet the 4.1% unemployment rate is historically low.

Inflation, sent spiralling upward in the early months of 2026 by the war with Iran, remains significantly above the Fed's 2% target. It has eased, however, in the last two months, undercutting arguments that it won't abate noticeably until rates go up.

With the economy not clearly tilting towards higher unemployment or rising inflation, the motivation for the FOMC to wait has only grown stronger. With twelve voting members, the FOMC needs to ensure that it does not become little more than a ‘talking shop’, a description that could never be levelled at it during Greenspan or Bernanke’s tenure.

"The current level of interest rates, many think, is still restrictive enough to bring inflation down," Richmond Fed President Thomas Barkin said on Thursday. He noted that much of the acceleration in inflation has ​come from shocks such as higher tariffs, elevated oil prices and the artificial intelligence investment boom, factors that "should pass" at some point. At least three Committee members are concerned about how long that ‘passing point’ will take to arrive. Barking also noted that the economy has become ‘something of a mystery’.

According to the Financial Times, a poll found that most US voters say they have become worse off under Donald Trump, revealing mounting discontent with the President’s handling of the economy and the cost of living.

With less than three months until November’s midterm elections, a nationwide Focaldata poll found that more than 53% of registered voters said their finances had deteriorated since Trump returned to the White House in January 2025. Almost 57% of independents and nearly a quarter of self-identified Republicans also felt worse off under the current President.

The FT found that voters were more likely to say they trusted Democrats than Republicans to handle inflation and the cost of living. The poll gave Democrats an edge on jobs and the economy, issues long seen as Republican strengths.

Unemployment among U.S.-born workers is rising, while wage growth stalls. The latest reporting shows this is directly linked to the sharp fall in immigration under Trump’s policies. This dynamic is now evident across multiple labour-market datasets.

Native-born unemployment is rising, even as the overall unemployment rate holds steady at 4.1% and annual wage gains run at 3.2%, the slowest since 2021. Meanwhile, foreign-born unemployment has fallen below that of native-born workers, reversing the long-standing pattern.

Sources point to two structural drivers: Moody’s notes that overall labour demand has weakened. When U.S.-born workers make up a larger share of the labour force, they feel the impact of falling demand more strongly. Net international migration fell from 2.7 million in 2024 to around 321,000 by last month, with some estimates suggesting negative net migration. This means fewer immigrant workers competing for jobs, a smaller foreign-born labour force, and lower foreign-born unemployment simply because the group has shrunk.

The U.S. dollar fell over the week, posting a clear weekly decline as softer U.S. data reduced expectations of near‑term Fed rate hikes. Safe‑haven flows briefly supported the dollar mid‑week, but not enough to offset the broader slide.

Christine Lagarde will speak at the World Economic Forum’s headquarters in Geneva this week, a visit that’s likely to revive discussions about an early departure as European Central Bank President.

Lagarde is scheduled to take part in a discussion on the global economy on Wednesday, according to a weekly agenda of public speaking engagements the ECB published on Friday.

While such panel appearances are noteworthy in themselves, rumours that Lagarde will leave before her eight-year term in Frankfurt ends in October 2027 began last year with a report that she may take over the WEF.

Speculation about Christine Lagarde’s participation in the 2027 French Presidential Election has also intensified, but she continues to insist she is not a candidate. The speculation stems from her admission that she may leave the ECB early to play a role in the national debate, combined with a turbulent French political landscape.

Lagarde told Les Échos that an early departure from the ECB is “possible”, saying France needs a “European voice” in the 2027 campaign. She has repeatedly stated: “I’m not a candidate for anything.” Although she will advocate for pro-European values “in whichever capacity” she is most effective.

Lagarde is a member of the WEF’s board of trustees, a role that officially qualifies her to run for the organisation’s top job. The board is holding an in-person meeting on Tuesday in Geneva, where Swiss media has reported that discussions will focus on the WEF’s future. The ECB’s agenda doesn’t say whether she’ll attend.

Speculation about Lagarde’s early exit has persisted, fuelled also by her own remarks. This month’s appearance will come just weeks after she said she won’t stay on as ECB president until her term ends.

While the WEF, known for its annual gathering in Davos, is still widely seen as an option for Lagarde, she has also recently declined to rule out a role in French politics.

Germany's prolonged economic woes are highlighting a widening gap between retirees with property, savings, and private pensions and older people struggling to cover rent, energy, and care costs.

Millions of pensioners in Germany are struggling to make ends meet because of fixed incomes, rising costs of housing, utilities, and healthcare, and inadequate retirement savings, as the country faces economic stagnation.

In Germany, the risk of poverty generally refers not to extreme poverty, as seen in some developing countries, but to relative poverty, measured against the median income of the country’s total population.

According to the European Union Statistics on Income and Living Conditions (EU-SILC) survey, a person is considered at risk of poverty if their income is less than 60% of the median income of the total population.

Not long ago, Greece was threatened with having to leave the European Union because of its high and rising public debt. The latest figures show that Greece has completed its rehabilitation into the “European family”, having made remarkable progress in reducing its debt-to-GDP ratio.

Greece has achieved the largest and fastest reduction in its debt-to-GDP ratio among Eurozone countries, marking a significant shift in its fiscal trajectory after years of elevated public debt levels.

According to Alpha Bank's analysis, Greece’s debt-to-GDP ratio fell from 209.4% in 2020 to 146.1% in 2025, a decline of more than 63% in five years. This represents the steepest reduction recorded in the Eurozone over that period.

The improvement is not limited to the ratio alone. The report notes that Greece, alongside Ireland and Cyprus, is among the few Eurozone countries to have reduced its nominal debt in 2024–2025, while several major economies such as France, Italy and Spain saw increases.

The decline has been supported by a combination of economic growth, fiscal discipline and debt management measures, including early repayments of existing obligations.

The Euro was broadly flat to slightly weaker in FX markets last week, with EUR/USD slipping and GBP/EUR gaining ground as markets priced in a less hawkish ECB stance and reacted to softer risk sentiment. However, with many members of the Central Bank’s Governing Council still on holiday, it will be a couple of weeks before they can reveal their voting intentions at the September meeting.

Have a great day!