27 August 2026: Burnham told to ‘drop Net Zero dogma’

Prime Minister Andy Burnham has said rising energy bills are “difficult” for people after Ofgem raised the UK price cap by 4% to a three-year high, with analysts forecasting a further 9% hike from January.

Speaking to reporters in London, the Prime Minister said: “It’s difficult for people, and I recognise that.

“But it’s why, within days of taking office, I announced that we would remove VAT from electricity bills to give people that little bit of help.

“That kicks in from October. We understand the price cap will have an impact, and this is the best we can do right now.

“We’ll continue to look at how we get energy prices down in the long term as we go forward, and that’s what we need to do too.”

The regulator said its price cap will rise by £60 per year, or £5 per month, to £1,723 for the average household using both electricity and gas, if this level is sustained for a year.

The increase reflected higher wholesale gas prices due to the ongoing conflict in the Middle East, with volatile global markets remaining the dominant driver of price changes.

In a further blow for consumers, analysts at a prominent energy analysis company released their latest forecast yesterday for a further 9% increase to the price cap in the New Year. This would put an average January bill up to £1,872 a year, GBP149 higher than October’s £1,723.

The Bank of England has not commented on the increase, but it will undoubtedly be discussed at next month’s Monetary Policy Committee meeting, given its likely effect on inflation.

Following the increase in the price cap, Labour has been urged to "drop its Net Zero dogma” as it battles claims that green charges are driving up energy bills. The increase is blamed on soaring wholesale gas prices, driven by the war in Iran.

These costs make up around 40% of the average bill. Other charges include green subsidies and network charges. Energy giant EDF has predicted that bills will remain "stubbornly high" for years because of policy and system costs, irrespective of whether gas prices fall.

However, Energy Secretary Miatta Fahnbulleh denied that Net Zero was costing people more, telling the BBC: “Absolutely not.”

She insisted that sky-high gas prices were the culprit and that clean energy was the only way to protect the country from geopolitical price spikes. This view has been countered several times by those who favour opening two new oil and gas fields in the North Sea.

A growing coalition of City analysts and fixed-income investors is urging the Bank of England to halt its aggressive bond-selling programme immediately. Critics argue that the Bank’s unique approach to quantitative tightening (QT) is artificially inflating the UK government’s long-term borrowing costs, penalising taxpayers by billions of pounds and destabilising the broader gilt market.

The debate strikes at the heart of macroeconomic policy in the post-pandemic era. While Central Banks globally are shrinking their balance sheets, the BoE stands alone among major monetary authorities in actively dumping government debt onto the open market. For international observers, including the Federal Reserve, the UK’s controversial experiment is a high-stakes test case for how aggressively a central bank can offload debt without breaking the sovereign bond market.

The pound was essentially flat to slightly weaker across major FX pairs yesterday, with GBP/USD drifting lower by roughly 0.03–0.06%, and similar marginal moves against other majors.

US core personal consumption expenditures inflation, the Federal Reserve’s preferred inflation gauge, held steady YoY in July, remaining well above the Federal Reserve’s 2% target, according to data the Bureau of Economic Analysis released yesterday.

The core PCE index, which excludes volatile food and energy prices, rose 3.3% YoY in July, unchanged from June.

Disposable personal income in the US increased by $125.9 billion, while personal consumption expenditures rose by $36.3 billion.

Persistent inflationary pressures in the US suggest the Federal Reserve may keep interest rates elevated for longer as it seeks to bring inflation back to its 2% target.

Meanwhile, Durable goods orders rose 1.1% MoM in July, beating market expectations.

Durable goods orders totalled $339.3 billion in July, the US Commerce Department announced yesterday.

Markets expected a 0.4% increase, while orders rose 0.5% in June.

A 2.3% surge in transportation equipment orders drove the overall increase in durable goods orders during this period.

New orders excluding transportation equipment increased by 0.4%, while orders excluding defence rose by 1.3% in July.

Durable goods orders, which include products with a lifespan of at least three years, provide significant insight into industrial production, since they include ‘big ticket items’ that signal capital expenditure.

It’s shaping up to be a pivotal week for global monetary policy, with Kevin Warsh delivering his first major speech as Fed chairman after a senior European Central Bank official said euro-zone interest rates must rise.

Isabel Schnabel, an Executive Board member of the European Central Bank, told Bloomberg that further rate hikes are needed, with inflation projected to exceed 2% for an “extended period.”

Investors also want to know how Warsh intends to return inflation to that level. In his first months on the job, he’s been reluctant to guide markets on the path ahead for interest rates. Warsh will speak tomorrow at the annual gathering of Central Bankers in Jackson Hole, Wyoming, where Schnabel will also be attending.

Treasury yields edged higher after the key US gauge showed inflation remains well above the Federal Reserve’s target, keeping alive expectations that the Central Bank will start raising interest rates by the end of the year.

The dollar was broadly flat to slightly softer in FX markets yesterday, with most major crosses moving by tiny amounts, typically under 0.1%. The day was characterised by low volatility and no major USD-specific catalysts, leaving the greenback drifting narrowly against G10 and EM currencies.

Next week will mark the end of the summer lull, which affects markets at this time of year. With the UK Bank holiday on Monday and Labour Day in the U.S. traditionally signalling the end of summer, volatility is expected to pick up the following week, as speculation begins about September’s Central Bank monetary policy meetings.

ECB executive board member Piero Cipollone says the Eurosystem is structurally incapable of linking specific individuals to their Digital Euro transactions, whether those payments are made on or offline.

He says current bank transfers already expose transaction details to the parties involved, whereas the Digital Euro is intended to deliver a higher level of privacy. Cipollone describes the project as offering the maximum degree of privacy that current technology can provide.

Cipollone adds that offline payments would take place directly between individuals, with details known only to the payer and the payee, similar to cash. For online transactions, he says banks would identify users only for anti-money laundering purposes.

As August draws to a close, central bankers, refreshed from their summer breaks, have returned to their offices, galvanised about the monetary policy decisions they must make in the next month. Kevin Warsh will deliver a major policy statement in Jackson Hole tomorrow, while Isabel Schnabel has already said rates must remain elevated for some considerable time to combat ‘sticky’ inflation.

At the current policy rate, inflation is not expected to return to target in the medium term, so additional monetary tightening is required, Schnabel told Bloomberg. She added that consumer price growth will likely stay above 2% for a considerable time, mostly due to elevated energy costs, and that delaying action until those costs feed into wages would put policymakers behind the curve.

Three other members of the Governing Council told Reuters earlier this week that they are inclined to approve a rate increase at their September meeting to curb inflationary effects stemming from the war in Iran. However, they show limited willingness to commit to further moves after that.

The ECB implemented its first rate2111111111 increase in nearly three years in June, aiming to stop war-driven energy price surges from permeating the broader economy. Schnabel observed that markets appear to grasp the ECB’s policy response mechanism well, though she declined to specify the likely magnitude of additional rate adjustments.

The Euro was slightly stronger in FX markets yesterday, with EUR/GBP up about 0.07%, while broader EUR performance against other majors was broadly stable. The session was quiet and low-volatility, driven more by cross-currency flows than by euro-specific catalysts.

Have a great day!