17 July 2025: Reeves is warned not to weaken banking safeguards

Inflation rose to 3.6% in June, driven by higher costs for food, travel, and fuel, which pushed consumer prices up for the third consecutive month.

The major increase seen in April was believed to be due to one-off factors, such as increases in council tax and energy bills; however, the expected return close to the Bank of England’s 2% target didn’t materialise.

Inflation is now at an eighteen-month high as the cost of living crisis has returned, and the country is in danger of entering a “doom loop” where higher prices drive inflation-busting wage demands, which lead to higher inflation and so on.

The UK is set to have the highest inflation in the G7 group of industrialised nations as Rachel Reeves struggles to drive the economy forward. She was disappointed by the data, which she told reporters showed there is still work to be done.

The Bank of England’s Monetary Policy Committee is still expected to cut the base rate of interest by twenty-five basis points to 4% at its next meeting, which is set to take place on 7th August.

The author behind the 2020 recipe book, Feed Your Family For £20 a Week, tells BBC Radio 5 Live Breakfast it's no longer possible after the latest inflation rate.“You’re not feeding your family for £20 these days," says Lorna Cooper.

“It used to be that people needed help to get through a tough spot, occasionally. Increasingly, now it’s every month. There’s nowhere to go. There’s not enough money to get to the end of the month to pay for everything and buy your food."

Cooper also estimated that a £160 shopping list in a book she wrote in 2019, with basic items that could cover you for eight weeks, would cost 71% more today, as much as £272.38.

"It’s a big jump," she says. “I don’t know anyone whose wages have increased by 71%.”

Bank of England Governor, Andrew Bailey, told reporters that the country does not need a digital currency, nicknamed “Britcoin”, becoming the latest official in a major economy to question the merits of central bank digital currencies.

While Andrew Bailey says it's crucial to embrace cutting-edge transaction methods, he questioned whether this Britcoin proposal is the answer.

"I remain to be convinced why the natural next step is to create a new form of money rather than put digital technology into retail payments and bank accounts," he said during his annual speech at Mansion House in London on Tuesday.

The Bank of England has been examining the merits of a digital pound for several years but has yet to make a concrete decision on whether to proceed. Both Canada and Australia have abandoned plans for a retail CBDC over the past 12 months.

The pound rallied to a high of 1.3486 yesterday as the inflation figures called into question the likelihood of a rate cut next month, but as the market investigated the data further, it trailed off to close at 1.3423.

President Trump renewed the possibility of dismissing Jerome Powell from his position as Chairman of the Federal Reserve yesterday.

Trump, however, has denied reports that he plans to fire Federal Reserve Chair, Jerome Powell. It came hours after reportedly telling a room full of Republicans that he planned to do so, and after a report by The New York Times claimed he'd drafted a letter to Powell.

Trump’s style during his second Presidency has been to try to keep both markets and Congress off balance as he tries to be less “obvious” in his policymaking, but is only succeeding in confusing markets.

The saga regarding Powell has been running even longer than his on-again, off-again introduction of tariffs on U.S. imports of raw materials and finished goods. He apparently appreciates the photo opportunity that he gets from signing executive orders into law.

Trump’s comment yesterday gave the financial markets whiplash, coming after he survived a group of hard-line House Republicans in the Oval Office on Tuesday night, who all want Powell ousted. The President was also working to assuage the rebels’ concerns about a Central Bank Digital Currency before a key vote yesterday.

Industrial Production data was released yesterday, showing a notable increase of 0.3%. This figure exceeds the forecasted growth of 0.1%, indicating a stronger-than-expected performance for the manufacturing, mining, and utilities sectors.

This 0.3% rise in Industrial Production is a positive development for the U.S. dollar. The data, which measures the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities, is considered a reliable indicator of the industrial sector’s health. A higher-than-expected reading is typically interpreted as bullish for the dollar, while a lower-than-expected reading is seen as bearish.

The actual growth of 0.3% also stands in stark contrast to the previous month’s stagnation, where the Industrial Production figure remained at 0.0%. This suggests a significant uptick in economic activity within the industrial sector, which could potentially translate into broader economic growth.

This stronger-than-anticipated performance in the industrial sector is a welcome sign for the U.S. economy, which has been grappling with various challenges. The increase in industrial production could potentially lead to a rise in employment levels and contribute to overall GDP growth.

It also marks a welcome return to considering actual data rather than speculation, which has become the norm recently as markets have been driven by opinions which have been masked as facts.

The dollar index initially rallied to a high of 98.91 as the data indicated a strengthening of the economy, but it fell back as the market considered the implications of Trump removing Powell from the Federal Reserve.

It is hard to understand the benefit that the European Union is deriving from the seeming delay in reaching an agreement with the U.S. over the imposition of tariffs on European exports to the U.S.

As talks remain “up in the air”, only President Trump is benefiting, since he thrives on the uncertainty that he is creating.

Trump has threatened to impose a blanket 30% tariff on all exports coming from Europe into the U.S.

With markets heavily positioned for a European growth renaissance fuelled by fiscal expansion, any escalation could reverse months of investor confidence and spark sharp corrections in European assets.

While European officials hope to de-escalate tensions before the deadline, the threat has already introduced significant policy uncertainty at a time when sentiment on European equities and the euro is riding high. The only way to lower the tension regarding a deal would seem to be an agreement.

According to Goldman Sachs, if the full 30% tariff package is implemented and sustained, it would raise the US effective tariff rate on EU goods to 26 percentage points, up from the current 8.5. The investment bank warns that this could result in a cumulative 1.2% decline in eurozone GDP by the end of 2026, with the most acute impact likely to materialise in the next few quarters.

Even under Goldman’s baseline scenario, which assumes a negotiated outcome that retains sector-specific tariffs and adds new levies on critical goods such as pharmaceuticals and aviation components, the eurozone would still face a 0.6% GDP hit.

“Much of the current strength in manufacturing reflects front-loading ahead of tariffs.

The appreciation of the Euro may be coming to an end, which may well have implications for inflation in the region, despite the ECB saying the currency has only had a minimal effect on prices.

The EU is likely to respond gradually to a 30% across-the-board tariff, likely beginning on the day the new US duties take effect, potentially increasing the risk of further trade escalation.

This level of speculation is harming confidence on both sides of the Atlantic.

The euro breached the 1.17 mark late last week, reaching levels last seen in September 2021. This 13% year-to-date surge positions the common currency on course for its strongest annual performance since 2017 and potentially even since 2003, even though the markets are beginning to be concerned about economic activity and growth in the region. However, the rally brings the euro closer to the psychologically significant 1.20 threshold.

The rally in the euro, or more exactly the fall in the dollar, is due to one overwhelming factor: the uncertainty that has been wrought on the markets by the uncertainty that surrounds Donald Trump’s threats to impose tariffs on each of America’s trading partners, of which the Eurozone is one of the biggest.

Although the 1.20 level looms large, the Euro faces a series of challenges before reaching that goal.

Yesterday, the single currency initially rallied to a high of 1.1721, its highest for a week, before the data released in the U.S. provided the dollar with some respite and the Euro closed at 1.1642.

Have a great day!