26 August 2026: Burnham is running out of ways to avoid giving it to us straight on tax

October cannot come quickly enough for the Prime Minister, as the political, Parliamentary, and party-management pressures on him are now so intense that the next fixed point in the political calendar, October, is the first realistic moment when stability, clarity, or relief might arrive.

October is when stabilising forces converge: Parliament returns from recess and the Conference season begins. This is the moment when a new leader can reset the narrative, assert authority, and stop the drip-feed of internal chaos.

While most analysts and economists understand the ‘August lull’ that happens every year, the timing of Burnham’s arrival in Westminster has allowed him to ‘get his ducks in order’ before Markets and Whitehall need decisions on fiscal plans, regulatory direction, and spending reviews, which cannot drift indefinitely.

Markets welcomed his fiscal-rules pledge, but only as a promise. They now want the maths. He must prove that every policy is fully funded, especially as gilt markets have been hypersensitive to unfunded commitments since 2022.

Reform UK’s surge and Labour’s internal ideological split mean he is squeezed from both sides. His economic platform, industrial strategy, regional investment, and public-service reform remain skeletal at best.

The media narrative is locked on “Can he deliver?” rather than “What will he deliver?” October is the first moment he can answer those questions with numbers, not rhetoric.

When asked about raising taxes, Andy Burnham has said: “I will do what I can, but I won’t be unrealistic, and people really need to understand that.”

This is as good a way of saying nothing as any. He has proved skilled at that art over the summer. The paradox of his modest honeymoon with the voters is that he didn’t actually want to take over until next month; he was trying to delay the handover from Keir Starmer, yet he has used the ‘August lull’ well.

So much so that it almost looks like a stroke of genius to launch a new Prime Minister while the House of Commons is in recess. He has launched low-cost, highly symbolic policies with minimal scrutiny.

Burnham has held one event where he took questions from the media pack, and he has given a few interviews, including those in Ukraine this week. Still, most of his interactions have been sound bites, with two short questions recorded by one broadcaster during a visit and made available to all.

The Bank of England has warned that the rise of artificial intelligence could keep interest rates higher for longer as a surge in productivity fuels inflation.

If AI delivers a surge in economic output as new tools allow workers to produce more, it could spark increased spending and investment, pushing up prices, according to a post on the Central Bank’s unofficial blog, Bank Underground.

‘If households and businesses expect productivity to rise in the future, they anticipate higher future incomes and profits, which changes behaviour today.’

‘They may start spending and investing before those gains actually materialise.’

‘This creates a scenario where demand rises first while supply takes time to catch up.’

‘If demand grows faster than supply, inflationary pressures can emerge.’ As a result, Central Banks would need to ‘tighten’ their monetary policy, which often includes raising interest rates, to ‘dampen’ inflation.

Sterling slipped slightly yesterday, delivering a broadly flat but mildly softer session across major FX pairs. GBP was marginally weaker against the USD and several other majors, with small, directionally consistent moves.

Federal Reserve Chairman Kevin Warsh's debut speech at the annual Jackson Hole conference this week, self-advertised as a choice between discussing near-term policy or broader principles, has taken on added weight as traders and analysts look for guidance on the recent jump in bond yields and reassurance of his independence from the Trump administration.

Warsh has said he wants to wait for recommendations from five ‌task forces established at the start of his tenure this spring before getting too detailed about his plans.

But markets have already sped towards a conclusion that the Fed's policy interest rate needs to be higher, with U.S. inflation having been above the 2% target for more than five years and Warsh's colleagues concerned that if the policy-setting Federal Open Market Committee doesn't hike rates to get inflation back to that level, the Central Bank's credibility could suffer.

Globally, what former Fed Chair and Nobel Economics Prize winner Ben Bernanke deemed a "global savings glut" that kept market interest rates low has evolved into a global savings squeeze with rising government debt, fractured international trade and ​supply lines, the costs of population ageing, and booming private investment in artificial intelligence competing to divvy up the dollars available to invest and lend.

Given the questions Warsh left open after his post-meeting press conference last month, ⁠economists see the Fed chief as needing to dwell less on the long-term ideas he wants to pursue and more on how the Central Bank is evaluating the economy in the here and now along with the implications of recent global market developments.

Today sees the release of the latest Personal Consumption Expenditures data, which is not only the Federal Reserve’s favoured measure of inflation, but is close to becoming the most important monthly data publication since the non-farm payroll data became ‘fractured’ by the Federal shutdowns.

Core PCE is expected to remain at 3.3% YoY, staying above the 2% target despite cooling trends.

Persistent energy risks could impact inflation trajectories. Asset reactions will diverge: lower-than-expected data should support tech stocks and weigh on the U.S. dollar, whereas a higher reading would increase Treasury yields, pressure growth stocks, and strengthen the dollar.

The dollar delivered a mixed, slightly fragile performance yesterday, stabilising after last week’s sell‑off but still trading near a multi‑month low. The USD showed only marginal gains at times, with broader pressure from fiscal concerns, Treasury buyback debates, and geopolitical risk.

Germany’s economy is growing slightly faster than initially estimated, with gross domestic product rising 0.3% in the second quarter compared to the previous three months, the Federal Statistical Office said yesterday. GDP, adjusted for price, seasonal and calendar effects, was 0.1% higher than the preliminary reading of 0.2%.

“The German economy is maintaining the growth momentum seen at the start of the year,” the statistics office President Ruth Brand said in a statement, adding that Q2 growth was driven mainly by stronger exports.

Exports of goods rose 2.6% QoQ in the April-June period, while imports of goods increased 2.1%, the data showed. Private and government consumption each edged up 0.1%, while investment contracted 0.2%.

The Bundesbank said in its latest monthly report that the economy was now clearly on a recovery path, with solid foreign demand supporting industry in Q2 despite elevated energy prices and supply chain disruptions linked to the Middle East conflict.

Domestic investment and consumption, however, remained weak, it said.

Industrial prices are rising in Spain at a rate considerably higher than those of the other main European economies. In June 2026, they were up 7.0% YoY, compared with the 4.6% increase recorded in the eurozone and 4.7% in the European Union, according to the latest homogeneous data published by Eurostat.

The comparison places Spain ahead of the other three major euro economies. Italy recorded a 6.8% increase, France 2.6%, and Germany 1.9%.

Although Spain and some countries have already published their national statistics for July, Eurostat will not release the European comparison for that month until next week.

During this sweltering summer, official, verified data on the Meloni government show a snapshot of Italy: improving public finances and declining migrant arrivals; the figures portray a country that, after decades of instability and gradual isolation, has regained credibility and influence on the international stage.

Italy’s problems have not disappeared. The country continues to contend with weak economic growth, a heavy public debt burden and the consequences of the large migratory flows recorded in many years. Nevertheless, the deficit has fallen, the yield spread has narrowed, and productive investment has increased. These are tangible results that present a very different picture of Italy from the one portrayed daily by the opposition.

The first sign of change comes from the economy and the renewed confidence that international markets are showing in Italy. This result has also been built through policy continuity and the gradual improvement of the country’s main financial indicators, as Prime Minister Giorgia Meloni emphasised in an interview with Italian media.

The spread between Italian and German government bond yields, which stood at approximately 240 basis points when the current government took office, has narrowed significantly. This trend suggests investors see less risk in Italian debt and strengthens the country’s standing in international markets.

The Euro delivered a slightly softer, broadly stable performance yesterday across major FX pairs. The EUR fell slightly against USD, JPY, AUD, and MXN, while posting marginal gains versus CHF and CAD. Overall, this depicts a mild risk‑off tone, but no directional break.

Have a great day!