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The headline numbers don’t do justice to the significance of the inflation data.

On the surface, this only looks like a small fall, with the consumer price index (CPI) dropping from 6.8% in July to 6.7% in August.

So what, you might ask? After all, it’s a far smaller drop than the one we heard about last month (July’s 6.8% was significantly down from June’s 7.9%).

The short answer – and this is very important – is that the vast majority of economists had expected inflation to rise in August, not to fall. Indeed, the consensus expectation, the average forecast among economists, was for CPI to climb up to 7%.

There were logical reasons to expect inflation to rise. Fuel prices have been climbing recently following a spike in the value of crude oil. Alcohol duties also increased in August, which was expected to outweigh the forces pulling inflation down: lower food and goods prices elsewhere in the “shopping basket” from which this index is constructed.

So the fact that CPI inflation fell rather than rose is significant.

Indeed, by my reckoning this is the biggest undershoot versus expectations that we’ve seen since the beginning of the cost of living crisis. For months, inflation came in higher than expected. Now it’s come in lower than expected.

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At this point you could be forgiven for asking: what’s the point of economists’ predictions when they always get it wrong? And you would have a point.

But at the very least the extent and direction in which they get it wrong gives us a sense of the momentum behind inflation. Indeed, look at core inflation, which strips out volatile items like food and fuel, and the undershoot was greater still: 6.2% versus expectations of 6.8%.

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‘The plan is working’

Put it all together and this represents what economists would call a “dovish” moment. It implies, all else equal, that central bankers might be less inclined to impose a further interest rate hike.

Does that mean the Bank of England will pause at its rate-setting meeting tomorrow rather than, as most economists had expected up until this morning, lifting borrowing costs by a further quarter percentage point to 5.5%?

The probability of a pause is certainly higher this morning than yesterday. But given how nervous Threadneedle Street is about inflation and given this is only one month’s worth of data, there’s still a good chance they go ahead with the rate increase anyway.

For the chancellor, the numbers are doubly welcome, because they make it even more likely that inflation will indeed halve this year – in line with one of the government’s five pledges.

For the rest of us, today has provided that rarest of all things in the current era: some good economic news.

Yes, prices are still rising – and fast.

Yes, it’s still much too early to declare an end to the cost of living crisis.

But the dynamic might just have shifted.

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Donald Trump threatens to impose additional 100% tariff on ‘extraordinarily aggressive’ China

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Donald Trump threatens to impose additional 100% tariff on 'extraordinarily aggressive' China

Donald Trump has announced the US will impose an additional 100% tariff on China imports, accusing it of taking an “extraordinarily aggressive position” on trade.

In a post to his Truth Social platform on Friday, the US president said Beijing had sent an “extremely hostile letter to the world” and imposed “large-scale export controls on virtually every product they make”.

Mr Trump, who warned the additional tariffs would start on 1 November, said the US would also impose export controls on all critical software to China.

The president added that he was imposing the tariffs because of export controls placed on rare earths by China.

He wrote: “Based on the fact that China has taken this unprecedented position, and speaking only for the USA, and not other nations who were similarly threatened, starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a tariff of 100% on China, over and above any tariff that they are currently paying.

“It is impossible to believe that China would have taken such an action, but they have, and the rest is history. Thank you for your attention to this matter!”

President Trump says he sees no reason to see President Xi as part of a trip to South Korea. Pic: Reuters
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President Trump says he sees no reason to see President Xi as part of a trip to South Korea. Pic: Reuters

Mr Trump said earlier on Friday that there “seems to be no reason” to meet with Chinese leader Xi Jinping in a scheduled meeting as part of an upcoming trip to South Korea at the end of this month.

He had posted: “I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems no reason to do so.”

Read more:
China tightens control of global rare earth supply
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The trip was scheduled to include a stop in Malaysia, which is hosting the Association of Southeast Asian Nations summit, a stop in Japan and then the stop to South Korea, where Mr Trump would meet Mr Xi ahead of the Asia-Pacific Economic Cooperation summit.

Mr Trump added: “There are many other countermeasures that are, likewise, under serious consideration.”

The move signalled the biggest rupture in relations in six months between Beijing and Washington – the world’s biggest factory and its biggest consumer.

It also threatens to escalate tensions between the two countries, prompting fears over the stability of the global economy.

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Sky’s Siobhan Robbins explains why Donald Trump didn’t receive the Nobel Peace Prize

Friday was Wall Street’s worst day since April, with the S&P 500 falling 2.7%, owing to fears about US-China relations.

China had restricted the access to rare earths ahead of the meeting between Presidents Trump and Xi.

Under the restrictions, Beijing would require foreign companies to get special approval for shipping the metallic elements abroad.

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Google warns against ‘onerous regulations’ after UK competition ruling

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Google warns against 'onerous regulations' after UK competition ruling

Google has warned the UK against imposing “onerous” and costly regulations after the competition watchdog ruled it had “strategic market status” for its search services.

The Competition and Markets Authority (CMA) said legal tests had been met to designate Google with the status in general search and search advertising services due to “substantial and entrenched market power”, with more than 90% of searches in the UK taking place on its platform.

The designation gives the CMA greater control on how Google operates its UK services.

The regulator said the Alphabet-owned firm’s Gemini AI assistant was not in the scope of the designation but other AI functionality, including AI Overviews, were.

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It launched the inquiry in January after new powers came into force and had previously flagged the finding in a provisional decision.

The CMA said the legislation allowed proportionate action to “improve competition in digital markets, helping to drive innovation, investment and growth across the UK economy”.

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It added that it would begin consultations on possible remedies soon.

What could happen?

These could include demanding changes to its search engine in the UK, including through so-called “choice screens”, and giving publishers more power.

Any action could risk a row with the government, as ministers seek a “growth first” agenda within the country’s regulatory bodies.

Will Hayter, executive director for digital markets at the CMA, said: “By promoting competition in digital markets like search and search advertising we can unlock opportunities for businesses big and small to support innovation and growth, driving investment across the UK economy.

“We have found that Google maintains a strategic position in the search and search advertising sector – with more than 90% of searches in the UK taking place on its platform.”

Google responded by arguing that the designation risked unintended consequences such as price rises and hits to innovation and growth.

Read more from Sky News:
Hack of popular messaging app shows risks of online age checks
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Its senior director for competition, Oliver Bethell, said: “The UK enjoys access to the latest products and services before other countries because it has so far avoided costly restrictions on popular services, such as search.

“Retaining this position means avoiding unduly onerous regulations and learning from the negative results seen in other jurisdictions, which have cost businesses an estimated 114 billion euros (£99.2 billion).

“Many of the ideas for interventions that have been raised in this process would inhibit UK innovation and growth, potentially slowing product launches at a time of profound AI-based innovation.

“Others pose direct harm to businesses, with some warning that they may be forced to raise prices for customers.”

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Discord hack shows dangers of online age checks as internet policing hopes put to the test

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Discord hack shows dangers of online age checks as internet policing hopes put to the test

Messaging platform Discord has said the official ID photos of around 70,000 users have been stolen by hackers.

The app, which is popular with gamers and teenagers, said the hackers targeted a firm responsible for verifying the ages of its users. Discord said its own platform was not breached.

The stolen data could include personal information, partial credit card numbers and messages with Discord’s customer service agents, the firm said.

No full credit card details, passwords or messages and activity beyond conversations with Discord customer support were leaked, it added.

Discord said it had revoked the third-party service’s access and was continuing to investigate. It said all affected users have been contacted.

“Looking ahead, we recommend impacted users stay alert when receiving messages or other communication that may seem suspicious,” it said.

Until recently, a hack like this could not have happened, because companies had no need to process and collect proofs of age.

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Now, so many governments are following the UK and introducing age verification for unsuitable or pornographic content that a company like Discord has to roll out age checks for a decent portion of its 200 million active users.

It’s a bit like the way that shops have to check your age if you’re buying alcohol – only because it’s online, it comes with a lot of additional complications.

Pic: Shutterstock
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Pic: Shutterstock

A shop, for instance, won’t keep a copy of your passport once they’ve checked your age.

And it definitely won’t keep it in a massive (yet strangely light) safe along with thousands of other passport photocopies, stored right by its front door, ready to be taken.

Online, it’s surprisingly easy to do just that.

Read more on Sky News:
AI ‘distorting women online’
Pros and cons of digital IDs
Impact of new online safety rules

It’s worth noting that the age verification system used by Discord wasn’t hacked itself. That system asked people to take a photo of themselves, then used software to estimate their age. Once the check was complete, the image was immediately deleted.

The problem came with the appeals part of the process, which was supplied to Discord by an as-yet-unnamed third party.

If someone thought that the age verification system had wrongly barred them from Discord they could send in a picture of their ID to prove their age. This collection of images was hacked. As a result, Discord says, more than 70,000 IDs are now in the possession of hackers.

(The hackers themselves claim that the number is much bigger – 2,185,151 photos. Discord says this is wrong and the hackers are simply trying to extort money. It’s a messy situation.)

There are ways to make age verification safer. Companies could stop storing photo ID, for instance (although then it would be impossible to know for sure if their checks were correct).

And advocates of ID cards will point out that a proper government ID could avoid the need to send pictures of your passport simply to prove your age. You’d use your digital ID instead, which would stay safely on your device.

But the best way to stop data being hacked is not to collect it in the first place.

We’re at the start of a defining test – can governments actually police the internet? Or will the measures that are supposed to make us safer actually end up making us less secure?

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