18 February 2025: Half of Britons believe that Reeves is doing a bad job

Facing protests about inheritance tax, pensioners revolting over the winter fuel payment and the wealthy leaving the country in droves due to the abolition of non-dom tax status, Rachel Reeves is the most unpopular Chancellor in modern times.

Chancellors have been disliked before, particularly when raising duty on beer, wine, and spirits at Budget time, but never rarely has a chancellor excited such venom in so many.

A recent poll found that 52% of British people think she is doing a bad job, while just 15% think she is doing well. Voters often feel disappointed with the actions of any Chancellor, given their job is usually to oversee rises in taxation.

But this time it feels different, more personal, and possibly even targeted towards traditional Conservative voters. She still appears to have the support of the Prime Minister, and with the government enjoying such a commanding majority, there is no question that she will remain in situ for the entirety of this Parliament.

Keir Starmer was in Paris yesterday for the emergency summit on the future of Ukraine. The UK and European Union are aggrieved that talks are taking place between the U.S. and Russia about how they end the conflict that has raged for three years.

Neither has been able to put forward any proposals for ending the war, merely wanting to punish Russian President Vladimir Putin for his invasion of another sovereign nation even as he claims to have been provoked by Ukraine’s attempts to join NATO.

Starmer, desperate to show Brussels some leadership, which it is sadly lacking, has said that he is open to placing UK soldiers into Ukraine as part of a peacekeeping force should the war end.

This may lead to conflict between him and his Chancellor since it will raise the level of financial commitment to defence when Reeves is desperately searching for growth to fund the Government’s plans for the economy.

The latest employment report will be published later this morning. The unemployment rate is expected to rise from 4.4% to 4.5% as the claimant count rises to 10k.

Rising unemployment has a two-fold negative effect on the economy, since it leads to lower tax receipts and an increase in benefit payments, neither of which will be appreciated by the Chancellor.

Bank of England Governor Andrew Bailey has poured cold water over the prospects for the UK economy after robust growth figures towards the end of 2024 had brought in more and more hope for the UK economy. However, Bailey believes that the current condition of the UK economy is the same as it always was, and its growth figures are currently ‘static’.

Bailey pointed to an underlying growth figure and an overall softening labour market. The growth figures towards the end of 2024 were like a bolster for the Labour Party that came to power last year, but Bailey thinks that it does little to change the overall standing position of the UK economy or the current labour market status.

Tomorrow’s release of inflation data is likely to have more of an effect on the pound, which saw further strength yesterday as it rallied to a high of 1.2634 and closed at 1.2627.

President Trump took a break from solving all that ails the world yesterday long enough to appoint an “envoy” to the Federal Reserve.

Kevin Hassett, the director of the National Economic Council, is set to serve as the Trump administration’s key point of contact with the Federal Reserve Chair Jerome Powell as the fight against inflation continues.

Hassett appeared on CBS News’ “Face the Nation” on Sunday and said that he is planning to hold regular lunch meetings with Powell and other central bank policymakers.

“Just this weekend, I have arranged to begin, once again, regular lunches with Jay Powell at the Federal Reserve,” Hassett said. “Jay and I have a long and collegial relationship, and I’m going to go over there with him and the other governors.”

“So, we’re going to talk about our views about what’s going on, and listen to his and that collegiality has been going on for four years when I was here before, and the president very much values that,” he said.

Hassett was asked whether the meetings were aimed at influencing the Federal Reserve’s decisions on monetary policy. He replied that “Jay is an independent person” and that the independence of the Fed is respected.

“One way to tell whether markets think, ‘Are we getting inflation under control,’ is to look at longer-term interest rates that the Fed doesn’t affect directly.

If you look at it, the 10-year Treasury rate has dropped about 40 basis points over the last couple of weeks while we announced our plan to control inflation. That saved the American people about $40 billion, just from talking about the stuff that we’re about to do,” he added.

President Trump has repeatedly criticized Powell and called for the Fed to lower interest rates. While Powell was testifying before Congress about monetary policy, Trump once again posted that the central bank should lower interest rates.

However, Trump’s plan to hit imports from foreign countries with sweeping reciprocal tariffs could nearly double U.S. inflation if fully imposed, a study said, intensifying a recent resurgence in consumer price increases.

“My view is it would mean a real shock to the American economy,” said Gary Hufbauer, an economist and senior fellow at the Peterson Institute for International Economics. “Quite a bit of inflation.”

The Trump administration has acknowledged the tariffs serve partly as a negotiating tactic aimed at prodding foreign countries to lower their import charges on the U.S.

A White House official also said countries that have the largest trade deficits with the U.S. will be examined first.

The US economy is no longer an outlier, with several data points and the weak January Retail Sales data released last week pointing to slower economic growth.

The dollar index fell to a low of 106.62 yesterday as the market began to focus on events taking place in Riyadh later today when U.S. and Russian representatives will meet to gain a better understanding of each other’s positions to end the war in Ukraine.

It closed at 106.73 as it looked to be bottoming out at the end of a significant correction.

ECB economists, after much deliberation, have concluded that they agree with financial markets and several commentators that the “neutral rate” for the Eurozone is between 1.75% and 2.25%.

Philip Lane, The ECB’s Chief Economist, agreed with the findings of his team and commented on the need for a balanced approach in the easing cycle, advocating a measured pace to avoid either stifling economic growth or fuelling excessive inflation.

He highlighted that a “middle path is appropriate,” ensuring that policymakers do not lean too heavily on either upside or downside risks.

Lane reiterated the importance of maintaining flexibility, stressing that the ECB must “maintain agility” in its decision-making, relying on incoming data and a meeting-by-meeting assessment rather than committing to a predefined rate path.

America’s protectionist trade policies would be particularly damaging to the German economy, which is export-driven, according to Bundesbank President Joachim Nagel.

My message is that protectionism leads to damage in every country it touches. There are no winners, only losers, from such policies.

Germany is Europe’s largest exporter to the U.S. Its economy would suffer from any increase in protectionism from Washington, according to Nagel.

At the Eurogroup meeting which took place yesterday, Economy Commissioner Valdis Dombrovskis spoke of his concerns about the talks that are taking place regarding an end to the conflict in Ukraine.

“Whatever is decided, Europe must play a role because what happens in Ukraine will determine much or most of Europe’s immediate economic future,” he said.

Economic ministers from the Eurozone are meeting in Brussels for the Eurogroup summit. Still, the most important meeting of the day took place in Paris, at the leaders’ summit hosted by French President Emmanuel Macron.

It is no coincidence that Dombrovskis is referring precisely to the meeting in France, since he wants to emphasize the link between Ukrainian destiny and European growth. “We must achieve a just and lasting peace,” he insisted as he arrived for the Council proceedings.

But “there can be no peace without Ukraine and the European Union,” and therefore without their involvement.

President Trump’s “America First” mantra has been far stronger in the first weeks of his second Presidency, with Europe taking the brunt of his measures, despite tariffs already being imposed on China, Mexico, and Canada.

Europe will need to “stand up and be counted” if its economy is not to be decimated by the imposition of tariffs on its exports to the U.S.

The euro lost some of its impetus yesterday but still managed to rally to a high of 1.0506, but in the end finished lower on the day, closing at 1.0483 as traders weighed up the economic effect of Europe’s exclusion from talks about an end to the war in Ukraine.

Have a great day!