23 September 2025: All eyes have turned to Reform

Nigel Farage has put forward several radical policies concerning Reform UK’s central “theme” of controlling migration in a speech that illustrated just how the right-wing party has changed since its strong showing in last year's General Election.

It is noticeable that as soon as there is a policy statement issued by reform now, the “major” parties immediately try to pick holes in it, most commonly concerning the funding and benefits of the proposals.

Farage often gets carried away and “spouts” numbers that are pure fantasy, like the apparent saving of £234 billion from doing away with indefinite leave to remain, which he spoke about yesterday.

Rachel Reeves, who is no stranger to “fantasy savings” herself, criticised Reform’s proposals as having no basis in reality. Praise indeed from a Chancellor who has been forced to U-turn several times to satisfy her critics on Labour's backbenches.

Reeves is still working on proposals that will cause the least damage to her reputation when she announces her November Budget.

Of all the wheezes that Chancellor Rachel Reeves is plotting to fix the ‘black hole’ in the public finances, she is now considering a ‘taxi tax’. Ahead of the Budget, it has been suggested that VAT may be applied to all cab rides. This plan is likely to end up backfiring badly on Reeves and the government more broadly.

According to reports this week, the Chancellor is likely to impose a blanket 20 percent rate of VAT on all taxi rides. Right now, taxi firms outside of London do not have to charge VAT because drivers are classed as self-employed, and most don’t hit the £90,000 annual threshold at which the tax has to be levied. The industry is now expecting the government to standardise the system, with a blanket VAT rate applied across the board.

There have been several holes spotted in Reeves’ proposals already; first, Local Councils in rural areas often use Taxi Firms to transport the elderly or disabled to hospital appointments, second, special schools use the cabs for the same reason, and thirds there would be a proliferation of cash only firms creating a “taxi black market” that would be impossible to police, and the former two uses would add the cost to already stretched council budgets.

It appears that it is back to the drawing board for Ms Reeves.

Nevertheless, it is clear that the three main parties are rattled by the lead Reform has built in opinion polls, and any words that emanate from the fertile mind of its leader are immediately pounced upon and deconstructed by Party officials.

Sterling had a quiet day on financial markets yesterday as traders and investors digested the implications of last week’s rate announcements from G7 Central Banks. It traded between 1.3453 and 1.3520, closing at 1.3513.

The early part of this week will be dominated by speeches from FOMC members, but while Williams, Musalem, Barkin and Hammack make comments that have been heard before, their newest member, Stephen Miran, has already made the case for significantly more loosening of monetary policy.

In his first speech as a member of the Board of Governors, Stephen Miran said interest rates should be roughly two percentage points below current levels, or around 2.5 percent.

Mr Miran warned that keeping interest rates elevated risks imperilling the labour market, which is already showing signs of cooling.

“Leaving short-term interest rates roughly two percentage points too tight risks unnecessary layoffs and higher unemployment,” he said.

Mr Miran’s comments came in the wake of his decision to vote against the Fed’s decision last week to lower rates by a quarter point. Mr Miran, who was sworn in to his job just minutes before the Fed’s meeting began, said he wanted to do a larger, half-point cut. Interest rates are now in a range of 4 to 4.25 percent.

He focused his remarks on estimates of what economists call “R-star,” which refers to the level of interest rates that neither speeds up the economy nor slows it down. He argued that immigration restrictions and higher saving rates because of tariffs and the raft of tax cuts passed this year had substantially lowered estimates.

He also argued that housing-related inflation, which is a substantial driver of overall price pressures, would sharply decelerate in the coming years. While he acknowledged that this was an “optimistic” view, he said “forecasters have underappreciated the significant impact of immigration policy on rent inflation, both on the way up and, now, on the way down.”

It is novel to hear Trump’s bluster put in more “acceptable” terms. However, the President reverted to type yesterday, calling Fed Chair Powell “incompetent”, arguing that new leadership is needed for economic stability.

He advocated for a substantial interest rate cut to support the housing market, pointing to inflation pressures and a weakening labour market. The Fed has faced scrutiny as unemployment claims have risen, and consumer prices have increased over alleged tariff-related impacts.

Trump said, “Well, other than, I don’t like him? He’s incompetent. The Fed chairman’s incompetent.” He added, “I have three people that I like a lot, any one of them would do a good job.” This was a clear reference to Christopher Waller and Michelle Bowman, who were placed on the Fed's Board of Governors following Trump’s nomination and Miran himself, who was sworn in at the start of last week’s meeting.

The exile of late-night talk show host Jimmy Kimmel will last just a week, ABC announced yesterday, and Kimmel will return this evening as the protests about free speech reached a crescendo.

The dollar index “gave back” most of the gains it made on Friday in brisk trading yesterday. It fell to a low of 97.31 and closed at that level.

ECB hawk Isabel Schnabel has wasted little time in trying to convince her colleagues on the Bank’s rate-setting Governing Council that interest rates should not fall any further in the short to medium term.

The nightmare of “high prices” is again looming in Europe, with the cost of foodstuffs considered to be on the rise again. Speaking at the meeting of the chief economists of the European Investment Bank (EIB). The German ECB economist pointed out that “food price inflation is re-accelerating, posing risks to consumer inflation expectations.”

Schnabel’s claims contradict Eurostat, according to which the price of food and drink also fell between July and August (from 3.3 percent to 3.2 percent). At least, that is what the latest data confirms.

An economist from the ECB told the same meeting that “while domestic demand has recovered robustly, it faces a challenging global environment”.

Until the second half of 2024, domestic demand recorded negative values, but then experienced a steady turnaround to 1 percent in the third quarter of 2024, 1.3 percent in the fourth quarter, 2.1 percent in the first quarter of 2025 and 2.8 percent at the end of the March-June 2025 period.

Hence, the suggestion to “rebalance the economy towards consumption,” but the rising cost of the shopping cart seriously risks curbing purchases elsewhere, leading domestic demand to deflate.

The same expert warned, 'When the economic future is unclear, there is less inclination to invest in long-term, far-reaching projects.' The call for politics to create the right conditions for growth and competitiveness.

Another European Central Bank Governing Council member, Joachim Nagel, played down concerns that the euro’s appreciation could weigh on exporters by curbing competitiveness.

While the common currency has strengthened almost 14% against the dollar this year, the Bundesbank president argued yesterday in a speech that it’s more meaningful to compare its performance against a broader group of trading partners. Such an analysis reveals a much smaller appreciation, he said.

“Simply looking at the euro’s gains against the US dollar therefore exaggerates the extent to which the local export economy is being burdened,” Nagel said. “Overall, I’m not concerned about the current valuation level of the euro.”

It is true that the moves in the Euro this year have been “dollar-based”. Traders do not feel inclined to buy the Euro due to any significant confidence that it will rally independently without a fall in the value of the dollar.

The single currency has been a key topic of debate among ECB officials, with some arguing that excessive gains could stifle the region’s recovery and put downward pressure on prices. Lithuanian central bank head Gediminas Simkus said at the weekend that it’s one reason why the ECB should cut interest rates again in December.

The common currency clambered back above the 1.18 level yesterday, reaching 1.1803 and closing at that level.

Have a great day!