18 August 2026: Dimon warns Healey over bank taxation

UK industrial electricity prices were the highest among IEA countries in 2024, at 26.6 p/kWh. This places the UK above Germany and France, and far above the U.S., where prices are roughly one-quarter of UK levels. The Institute of Economic Affairs finds UK industrial electricity prices are 63% above the international median, again the highest in the developed world. The divergence began after 2005 and has widened sharply.

The impact on UK industry is severe and well documented: Energy-intensive output has fallen by a third since 2021, hitting its lowest level since 1990. Industrial energy consumption is down 45% since 2004, reflecting closures and offshoring. Meanwhile, 40% of firms have cut investment due to high energy costs.

This is hitting UK manufacturing competitiveness hard, with steel, chemicals, ceramics and other energy-intensive industries facing existential pressure.

This is not a cyclical issue; it is structural and must be addressed if the UK is to regain any semblance of competitiveness.

The consultation phase for the oil and gas fields Jackdaw and Rosebank has now ended, and Andy Burnham faces a tough decision on whether to allow drilling to commence. If he agrees, the supply could help cut industrial energy costs and create thousands of jobs in the north east of Scotland. Still, environmental campaigners have labelled the projects a ‘giant act of environmental vandalism’.

JPMorgan Chase & Co.’s CEO, Jamie Dimon, warned UK Chancellor of the Exchequer John Healey against higher taxes on banks as Prime Minister Andy Burnham’s government prepares its budget for October, the Financial Times reported.

Dimon said higher taxes would drive away jobs, citing the decline in finance jobs in New York that he blamed in part on the city’s tax burden, the report said. During an introductory call last week about his firm’s UK operations, Dimon emphasised the need for governments to better support economies, including through tax policy, according to a person familiar with the matter.

Burnham has left the door open to increasing bank taxes in the budget, as strong profits in the financial industry spur calls, including from the TUC, to increase levies on lenders.

If the Bank of England wants to shift the MPC’s centre of gravity, it needs a fourth dissenter. Four hawkish votes would turn the current minority into a credible alternative policy path, not merely a warning signal.

Dissent is rising, from 8–1 to 7–2 to 6–3 over the past three meetings, but three hawks remain only a faction. A fourth dissenter would fundamentally alter the dynamics of the September meeting.

A fourth dissenter would signal to markets that the MPC’s centre is shifting towards pre-emptive tightening in response to energy-driven inflation risks. This matters because the BoE’s own projections show CPI re-accelerating towards 3.2% in Q4 due to Middle East energy shocks. The three current dissenters already argue that waiting risks acting too late. A fourth would imply that the majority’s “active hold” is losing credibility.

Sterling strengthened yesterday, driven mainly by broad US‑dollar weakness, while performance against other majors was mixed. The data show a clean GBP‑USD gain, a flat GBP‑EUR, and divergence across commodity and high‑beta crosses.

Wells Fargo is revising its economic outlook higher on inflation and interest rates, shifting away from an earlier expectation of steady disinflation.

The financial institution now expects price pressures to remain elevated longer than previously projected, keeping monetary policy tighter through 2027.

Higher energy costs, new tariffs, and ongoing supply-chain frictions are the primary drivers behind the upgraded CPI forecasts for both 2026 and 2027, the bank noted.

While easing energy prices are still expected to provide the main source of relief next year, the bank sees only limited further progress on inflation in 2027. Core inflation is likely to stay sticky, supported by resilient services demand and rising needs for labour, materials, and construction linked to artificial intelligence investment.

The firmer inflation path is also shaping expectations for the Federal Reserve. With Kevin Warsh as chair and a clear anti-inflation posture, Wells Fargo now looks for additional policy tightening. As a result, the bank is modestly lifting its federal funds rate targets for 2026 and 2027.

Meanwhile, billionaire veteran investor and former Goldman Sachs CEO Leo Cooperman laid out a troubling outlook for the US economy and markets, predicting the US economy could tip into a recession within the next year.

Speaking to CNBC, the Omega Advisors CEO pointed to several signs in today's market that parallel past boom-and-bust cycles. The famed hedge funder said these signs point to the end of the current economic cycle and a period of turbulence that could also hit stocks as AI hype starts to fizzle out.

"I think that we're going to have a recession sometime next year, and that will probably bring the market down," Cooperman said, adding that he believed earnings estimates for the S&P 500 were mispriced.

The benchmark index is on track to post year-over-year earnings growth of more than 50% this quarter, the fastest pace of earnings growth since the pandemic stock boom, according to the latest update from FactSet.

However, Cooperman is in the minority on Wall Street, where most forecasters are confident in the enduring demand for AI and believe investment in the technology will pay off from an ROI perspective. Despite a recent rotation in the AI trade, the Nasdaq 100 is on track for another year of double-digit gains, up 19% from January levels.

U.S. President Trump has told the media that he is unconcerned about the results of the Midterm elections in November. He either believes he will leave in two more years, since he cannot run for a third term, or he is continuing the massive delusion of his own popularity that has defined his second term in office.

Trump has demanded that Iran surrender and threatened to bomb Oman if it interferes with the reopening of the Strait of Hormuz, as a 60-day ceasefire deal between Washington and Tehran expired without an agreement to end the war.

Speaking on Fox News on Monday, Trump said that Iran should “put up the white flag of surrender” in the five-month-long US-Israel war, confirming that his administration had opened a direct backchannel with Iran’s Islamic Revolutionary Guard Corps.

He described the IRGC as “good poker players” who are “dying”.

Trump insisted he was in no rush to end the conflict, which he has lost significant control of and which has hurt his political support ahead of US midterm elections in November, when Democrats are seeking to retake Congress.

“I have no schedule,” he said. “I’m not in a hurry.”

Rather, Trump once again sought to project strength, threatening that he could bomb US ally Oman if it “gets in the way” of a deal to reopen the Strait of Hormuz, a critical waterway for global oil supplies that Iran has blockaded.

The dollar weakened broadly yesterday, extending a multi-day pullback as softer US data continued to erode market expectations of further Federal Reserve tightening. The dollar index slipped to around 99.60, marking its third consecutive daily decline and leaving the greenback under pressure across most major pairs.

A correction in US technology stocks is likely. It could threaten Eurozone financial stability, even if AI eventually lives up to investors’ hopes, a team of European Central Bank economists has warned, according to the FT.

In a post on the ECB’s blog on Monday, the researchers wrote that a pullback in the tech sector need not be driven by irrational exuberance and “should be expected even if current valuations are rational”.

The warning matters for Europe, even though most of the tech stock gains in recent years have occurred in US markets. Euro area households have about €440bn of exposure to US tech equities, largely through investment funds. At the same time, insurers and pension funds also have significant exposure to the so-called Magnificent Seven megacap tech stocks.

US and euro area stock markets have historically been highly correlated, leaving European investors vulnerable to a Wall Street crash, the economists added. A “US AI fallout would not remain a US problem” but could become “a question of financial stability for the Eurozone”, they wrote, adding that a stock market crash combined with “broader market instability” would be particularly dangerous.

The tech-heavy Nasdaq 100 index sold off last month but has since rebounded to near its record high. The economists compared the AI investment boom to previous innovation-driven investment frenzies such as the 19th-century railway boom, the expansion of electricity and radio in the 1920s, and the dotcom era at the turn of this century.

ECB Chief Economist Philip Lane has just returned from his last annual holiday in his current role. Lane will leave his post next year at the end of his eight-year rotation. His departure will come as the top figures on the ECB’s Managing Board move on.

Europe is spending on defence like it hasn’t in decades, and the European Central Bank is starting to talk openly about what that means for inflation, debt, and monetary policy. Lane joined a panel at the European Economic Association’s annual congress in Dublin yesterday, laying out the macroeconomic consequences of a continent that’s rapidly rearming.

The numbers tell a clear story. Defence spending across the 27 EU member states hit €418 billion in 2025, a 20% jump from 2024 and nearly double the €218 billion spent in 2021. That kind of fiscal acceleration doesn’t happen quietly.

The panel, organised by the European Stability Mechanism and titled “Europe’s Defence Build-Up: Macroeconomic, Fiscal, and Financial Stability Challenges,” zeroed in on a tension that economists love and policymakers dread. More government spending can juice economic output in the short term, with defence spending multipliers estimated at roughly 1. That means every euro spent on defence generates about one euro of GDP.

Historical analysis presented at the panel suggests that defence build-up episodes tend to widen fiscal deficits by an average of 2.6% of GDP. Within three years of a sustained defence ramp-up, debt-to-GDP ratios have historically climbed by around 7%.

For an economic bloc with GDP growth projections of a modest 0.8%, that’s a meaningful deterioration in fiscal health.

The panel explored how the composition of defence spending matters enormously. Money directed towards research and development, for instance, tends to have different long-run productivity effects from current spending on personnel and operations.

Lane and his fellow panellists also wrestled with the implications for inflation. When governments inject hundreds of billions of euros into the economy through defence procurement, that demand competes with the private sector for workers, materials, and industrial capacity.

Over the next couple of weeks, most of Lane’s colleagues at the Central Bank will return from vacation, after which markets can expect further details on the likelihood of a hike at the next monetary policy meeting.

The euro strengthened yesterday, extending a multi-session rally as broad US-dollar weakness, driven by soft US data and fading Fed-hike expectations, continued to dominate FX markets. EUR/USD rose to a two-month high around 1.1580–1.1600, marking its third straight daily gain.

Have a great day!