17 November 2025: Reeves to hit homes with property levy under council tax shake‑up

MPC member Catherine Mann will make a speech later today in which she is expected to underline her hawkish view of monetary policy by telling reporters that she believes that inflation is still “sticky” and she will not be supporting an interest rate cut until the balance of risks is more clearly favouring economic growth over consumer prices.

“There is downside risk, pointing to “modest” growth at best and a softening labour market, “but there is unequivocal upside evidence of inflation being above target, staying sustained above target”, she said in her most recent speech in Washington at the IMF annual conference.

The Chancellor of the Exchequer, Rachel Reeves, appears to have been forced into another painful U-turn, this time by her boss, the Prime Minister. Having fed the flames of an income tax increase in a press conference last week, in which she all but confirmed that the basic rate of income tax would be increased for the first time in fifty years.

Sir Keir Starmer and his Cabinet colleagues appear to have bowed to the public backlash against such a move.

The “official” line is that the latest data shows the hole in the nation's finances is smaller than at first thought, giving Reeves more “wiggle room”.

It is highly unusual, if not unique, for a Chancellor to make her considerations in such a public way. She is stoking the feeding frenzy that will grow to a crescendo before her speech to MPs on November 26.

Government backbenchers have spent the past sixteen months gradually losing respect for the Prime Minister as they have begun to realise that their Party’s stunning victory in the July 2024 General Election had very little to do with their leader's similarity to great previous Labour Prime Ministers, as it became clear that even serial loser Neil Kinnock would have won last year!

It is not clear if the rumblings about a leadership challenge have abated or simply been brushed under the carpet as preparations for the budget take centre stage.

Data released overnight shows that house prices fell by 1.8% in November, bringing the annual rate down by 0.5%. The decade-high number of homes available for sale continues to put downward pressure on prices. At the same time, concerns about how the upcoming Budget will affect personal finances and housing affordability are unsettling some potential movers, Rightmove claims.

Both of these factors are compounding the seasonal price slowdown we’d usually see in November, with the Christmas lull arriving early this year.

With buyers more distracted than usual, sellers who have already come to market are reducing their asking prices by more than the norm, as they attempt to entice bargain-hunting buyers. Over a third (34%) of homes available for sale have had an asking price reduction, with the average size of price reduction being 7%. Both figures are the highest since February 2024.

Last week, the pound mostly ignored politics, reaching a high of 1.3215 and closing at 1.3168.

The minutes of the latest FOMC meeting will be published later this week. The meeting was held at the peak of the Federal Shutdown, with rate-setters deciding to cut rates by 25 basis points based on anecdotal evidence that job cuts were increasing.

There has been significant “chatter” from members of the committee in the intervening period, which has seen them “set out their stalls” for a further cut at next month's meeting.

Jerome Powell’s statement that a further reduction of the policy rate at the end of the year “is not a foregone conclusion” quickly recalibrated the market’s expectations.

Boston Fed president Susan Collins last week cast further doubt on a reduction next month, arguing that there was “a relatively high bar for additional easing in the near term”. The Central Bank’s uncertainty was primarily due to the US government shutdown, which ended after 43 days last Wednesday.

Key data on the labour market and inflation was not published while government services were halted, leaving investors in the dark about the health of the world’s biggest economy. An absence of data and the delayed release of other closely watched measures of the state of the jobs market mean “the Fed may have an incomplete picture” of the economy during its December meeting, said Morgan Stanley analysts in a note to clients.

The two sides of the argument were perfectly illustrated by Dallas Federal Reserve President Lorie Logan and newly appointed Fed Governor Stephen Miran last week. Logan told reporters that her concern is that inflation is too high, trending upward, and taking too long to get to the Fed's 2% target. Meanwhile, Miran holds the opposite view, telling reporters that recent data has made the case for a rate cut even stronger.

Traders, who have begun winding down for the end of the year, are mostly ignoring these remarks, since it is clear that the FOMC is almost equally split, with the President encouraging the more aggressively dovish members of the Committee to move against Powell's hawkish position.

The dollar index lost most of the ground it had made earlier in the month, last week, with the settlement of the Federal Shutdown having little effect. It fell to 98.99 and closed at 99.29. A close above the 99 level offered some encouragement for the long term.

ECB member Central Banks will not buy bitcoin to hold as part of their reserves, ECB President Christine Lagarde told attendees at a cryptocurrency conference earlier in the year. However, it emerged last week that the Czech National Bank (CNB) has gone ahead with limited purchases. While this bitcoin is not held in the CNB’s official international reserves, it is now one step closer to making that a reality.

CNB Governor Aleš Michl previously told the Financial Times of his desire to allocate as much as 5% of the Central Bank’s reserves to bitcoin.

For now, the CNB has created a “test portfolio” of digital assets that include both bitcoin and a variety of U.S. dollar-derived tokens. The bank will report on its experiences with these digital assets over the next few years. According to Michl, evaluating Bitcoin’s potential use within the Central Bank’s reserves is indeed one of the aims of this new project.

This latest move from the CNB is not the first time bitcoin has been a source of embarrassment for Lagarde this year; just last month, the ECB president was also confronted about past statements that the cryptocurrency lacked any intrinsic value. Bitcoin has since run from roughly $35,000 to $125,000 since those comments were made, and the crypto asset now sits around the $100,000 mark.

Traditionalists still agree with Lagarde’s view that Bitcoin is little more than an example of other stablecoins that trade upon public FOMO (fear of missing out). However, those who have made millions in the new market say that since the end of the gold standard, “normal” currencies also have no intrinsic value, just the backing of global financial institutions.

Back in the “real world”, ECB Governing Council and Executive Board Member Isabel Schnabel, speaking at a conference on Saturday, said there's a positive underlying momentum in the Eurozone economy. However, food price inflation is still strong, and there is still a “stickiness” in services inflation, which has come down from 4% but is still above 3%.

She still believes that Inflation risks are “tilted a little bit” to the upside, although the market can tolerate minor deviations from the inflation target in either direction. This is a view held by a majority of ECB members.

The primary focus should still be on core inflation, as she is not seeing sustained disinflationary pressures, but interest rates are absolutely in a good place.

The eurozone economy expanded modestly in the third quarter of the year, while the trade surplus widened in September due to strong exports to the US, according to Eurostat data. The bloc has proven resilient to trade uncertainty this year and continues to grow at a respectable pace compared to international peers, although economists see few catalysts for faster growth.

The economy grew 0.2% in Q3, in line with estimates from later October, as France and Spain offset Germany, which is stagnating for the third year in a row on weak output, poor exports and muted private consumption. Compared to this time last year, the eurozone's gross domestic product increased by 1.4%, just ahead of expectations (1.3%) in a Reuters poll of economists, propelled by Spain's strong performance.

The bloc's trade surplus increased from €1.9bn to €19.4bn in September as exports to the US grew faster than imports, despite the drag from tariffs.

The Euro traded modestly higher last week, reaching a high of 1.1655 and closing at 1.1620.

Have a great day!