The economy is stagnating and job losses are mounting. Now is the time to cut interest rates again.
That was the view of the Bank of England’s nine-member rate setting committee on Thursday.
Well, at least five of them.
The other four presented us with a different view: Inflation is above target and climbing – this is no time to cut interest rates.
Who is right? All of them and none of them.
Central bankers have been backed into a corner by the current economic climate and navigating a path out is challenging.
The difficulty in charting that route was on display as the Bank struggled to decide on the best course of monetary policy.
The committee had to take it to a re-vote for the first time in the Bank’s history.
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1:40
Bank of England is ‘a bit muddled’
On one side, central bankers – including Andrew Bailey – were swayed by the data on the economy. Growth is “subdued”, they said, and job losses are mounting.
This should weigh on wage increases, which are already moderating, and in turn inflation.
One member, Alan Taylor, was so worried about the economy he initially suggested a larger half a percentage point cut.
On the other side, their colleagues were alarmed by inflation.
In a blow to the chancellor, the September figure is used to uprate a number of benefits and pensions. The Bank lifted it from a previous forecast of 3.75%.
In explaining the increase, the Bank blamed higher utility bills and food prices.
Food price inflation could hit 5.5% this year, an increase driven by poor harvests, some expensive packaging regulations as well as higher employment costs arising from the Autumn Budget.
Image: Rachel Reeves on Thursday. Pic: PA
When pressed by Sky News on the main contributor to that increase – poor harvests or government policy – the governor said: “It’s about 50-50.”
The Bank doesn’t like to get political but nothing about this is flattering for the chancellor.
The Bank said food retailers, including supermarkets, were passing on higher national insurance and living wage costs – the ones announced in the Autumn Budget – to customers.
Economists at the Bank pointed out that food retailers employ a large proportion of low wage workers and are more vulnerable to the lowering of the national insurance threshold because they have a larger proportion of part-time workers.
Of all the types of inflation, food price inflation is among the most dangerous.
Households spend 11% of their disposable income, meaning higher food price inflation can play an outsized role in our perception of how high overall inflation in the economy is.
When that happens, workers are more likely to push for pay rises, a dangerous loop that can lead to higher inflation.
So while the chancellor is publicly celebrating the Bank’s fifth interest rate cut in a year, behind the scenes she will have very little to cheer.
UK car production fell by more than a quarter (27.1%) last month as a cyberattack at Jaguar Land Rover halted manufacturing at the plant, industry figures show.
The total number of vehicles coming off assembly lines – including cars and vans – fell an even sharper 35.9%, according to September data from the Society of Motor Manufacturers and Traders (SMMT).
“Largely responsible” for the drop was the five-week pause in production at Jaguar Land Rover (JLR) due to a malicious cyber attack, as other car makers reported growth.
JLR’s assembly lines in the West Midlands and Halewood on Merseyside were paused from late August to early October as a result.
During this time, not a single vehicle was made. Production has since restarted, but the attack is believed to have been the “most financially damaging” in UK history at an estimated cost of £1.9bn, according to the security body the Cyber Monitoring Centre.
It was the lowest number of cars made in any September in the UK since 1952, including during the COVID-19 lockdown.
More on Cyber Attacks
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Are we in a cyber attack ‘epidemic’?
Despite the restart, the sector remains “under immense pressure”, the SMMT’s chief executive Mike Hawes said.
The phased restart of operations led to a small boost in manufacturing output this month, according to a closely watched survey.
Of the cars that were made, nearly half (47.8%) were battery electric, plug-in hybrid or hybrid.
The vast majority, 76% of the total vehicles output, were made for export.
The top destinations are the European Union, US, Turkey, Japan and South Korea.
JLR was just the latest business to be the subject of a cyberattack.
Harrods, the Co-Op, and Marks and Spencer, are among the companies that have struggled in the past year with such attacks.
Championship club Sheffield Wednesday have filed for administration, according to a court filing, which will result in the already struggling side being hit with a 12-point deduction.
The South Yorkshire club currently sit bottom of the Championship, the second tier of English football, with just six points from 11 games.
Known as The Owls, Wednesday are one of the oldest surviving clubs in world football, with more than 150 years of history.
Court records confirm the club have filed for administration. A notice was filed at a specialist court at 10.01am.
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2:58
Sky’s Rob Harris reports on the news that Sheffield Wednesday have filed for administration
What has happened?
The Owls, who host Oxford United on Saturday, have been in turmoil for a long time.
On 3 June, owner Dejphon Chansiri, a Thai canned fish magnate who took over the club in 2015, was charged with breaching EFL regulations regarding payment obligations.
Image: Sheffield Wednesday fans protest the ownership at a game away to Leeds United in January. Pic: Reuters
Weeks later, Mr Chansiri said he was willing to sell the club in a statement on their official website.
Image: Sheffield Wednesday’s troubles have sparked furious protests from fans. Pic: PA
Their crisis deepened just days later when another embargo was imposed on the club relating to payments owed to HMRC, before players and staff were not paid on time on 30 June.
In the months that followed, forwards Josh Windass and Michael Smith left the club by mutual consent. Manager Danny Rohl, now at Rangers, also left by mutual consent.
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2:12
Frustrated Sheffield Wednesday supporters have targeted their embattled club’s owner in a highly-visible protest during their opening match of the season.
The Owls were forced to close the 9,255-capacity North Stand at Hillsborough after a Prohibition Notice was issued by Sheffield City Council.
‘Current uncertainty’
On 6 August, the EFL released a statement, saying: “We are clear that the current owner needs either to fund the club to meet its obligations or make good on his commitment to sell to a well-funded party, for fair market value – ending the current uncertainty and impasse.”
On 13 August, the Prohibition Notice was lifted, but a month later, news emerged of a winding-up petition over £1m owed to HMRC.
Last season, Wednesday finished 12th. They had already been placed under registration embargoes in the last two seasons after being hit by a six-point deduction during the 2020/21 campaign, for breaching profit and sustainability rules.
With a 12-point deduction, the Owls would be 15 points away from safety in the Championship.
Doing well were computer and telecommunications retailers as the iPhone 17 launched in the month, while online jewellers reported strong demand for gold despite the price hovering around record highs.
Gold has been in demand, and in recent days reached a record high, as some investors moved money out of the US dollar and government bonds amid the ongoing government shutdown.
It came despite a rainy month – which typically keeps shoppers at home – and a five-day tube strike in London.
The impact of the rain could be seen, however, in the boost to online spending, which rose to one of the highest levels since the end of the pandemic.
A fall was recorded in food shop sales from August to September, signalling a response to high food price inflation.
A good week for the economy?
Retail sales figures are significant as they measure household consumption, the largest expenditure in the UK economy.
Growing retail sales can mean economic growth, which the government has repeatedly said is its top priority.
Earlier this week, another key economic measure came in better than expected.
Inflation remained at 3.8% rather than rising to the widely expected 4% – double the target rate set by the interest rate-setters at the Bank of England.
Consumers were feeling better about their finances, a closely watched measure of consumer confidence showed on Friday.
Buying sentiment is up from last month, according to market research company GFK, as intentions to buy big-ticket items like electrical goods and furniture rose.
Combined, it suggests people are not feeling too gloomy in the run-up to the November budget.