Price rises in the UK are to be the highest among the G7 club of industrialised nations, according to the International Monetary Fund (IMF).

Inflation will be the highest among the club both this year and next, the world’s lender of last resort has said in its World Economic Outlook.

It is an unexpected increase from the IMF’s July forecast.

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There was mixed news elsewhere in the outlook, as the UK’s economic growth forecast, as measured by GDP, was revised up for this year but revised down for next.

Latest data showed inflation stood at 3.8% and is forecast by the Bank of England to reach 4% by the end of the year.

The IMF, however, said it expected inflation to average at 3.4% in 2025, up from its previously predicted 3.2%.

That is forecast to slow to 2.5% this year, higher than the 2.3% anticipated just three months ago.

Food and services inflation had been particularly high in recent months due to rising wage bills and poor harvests.

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Economic growth will be a higher 1.3% this year, up from the 1.2% forecast in July, thanks to a strong first few months of the year.

Next year, however, GDP will be 1.4% rather than 1.3% as economies across the world feel trade pressures.

Political reaction

Chancellor Rachel Reeves said: “This is the second consecutive upgrade to this year’s growth forecast from the IMF.

“But know this is just the start. For too many people, our economy feels stuck. Working people feel it every day, experts talk about it, and I am going to deal with it.”

Shadow chancellor Sir Mel Stride said the IMF assessment made for “grim reading”.

“Since taking office, Labour have allowed the cost of living to rise, debt to balloon, and business confidence to collapse to record lows,” he said.

“Working people are feeling the impact every time they shop, fill up the car, or pay their mortgage.”

The jobs market continued to slow, with 9,000 fewer vacancies in the three months to September, official figures show.

It is the 39th consecutive period where vacancy numbers have dropped.

Having fewer job openings can mean it is harder to find work.

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There was also a surprise increase in the unemployment rate, up to 4.8% from 4.7% a month earlier, primarily driven by younger people, as a record number of people over 65 are in work, the Office for National Statistics (ONS) said.

Economists polled by Reuters anticipated no change in the jobless rate, but instead the figure is now the highest since the three months to May 2021, when the country was in lockdown due to the COVID-19 pandemic.

The ONS, however, has advised caution when interpreting changes in the monthly unemployment rate and job vacancy numbers due to concerns over the reliability of the figures.

The labour market has struggled in recent months as the cost of employing staff became more expensive due to higher employers’ national insurance contributions and an increased minimum wage.

Wage rises slowing

Further signs of a slowing labour market were seen in the fall of annual private sector wage growth to the lowest rate in nearly four years – 4.4%.

Public sector pay growth increased more quickly, at 6%, as some public sector pay rises were awarded earlier than they were last year.

Average weekly earnings rose more than expected by economists at 5% and also more than previously thought after a revision to last month’s figures (4.8%).

Also published by the ONS was data on industrial action, which showed August had the fewest working days lost to strike action in a single month for nearly six years.

What does it mean for interest rates?

While a tough job market is difficult for people looking for work, the slowing wage rises can mean interest rates are brought down.

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The rate-setters at the Bank of England had been concerned about the effect higher wages could have on inflation, which it is mandated to bring to 2% though latest figures showed it was at 3.8%.

Following today’s figures, traders expect a cut in the interest rate to 4.75% in December.

No change is anticipated at the next interest rate setter meeting in November.

For most of human history, no one paid all that much attention to the 17 rare earth elements.

An obscure suite of elements that sit in their own corner of the periodic table, they were mostly renowned among chemists and geologists for being tricky and fiddly – incredibly hard to refine, but with chemical facets that made them, well… interesting.

Not so much for a single thing they did by themselves, but for what they did in conjunction with other elements.

Added to alloys, rare earths can make them stronger, more ductile, more heat-resistant, and so on. Think of them as a sort of metallic condiment: a seasoning you add to other substances to make them stronger, harder, better.

The best example is probably neodymium. On its own, there’s nothing especially spectacular about this rare earth element. But add it to iron and boron, and you end up with the strongest magnets in the world. Neodymium iron boron magnets are everywhere.

If you have a pair of headphones or earbuds, the speakers inside them (“drivers” is the technical term) are driven by these rare earth magnets.

If you have a pair of Apple AirPods, those magnets aren’t just in the speakers; they’re what’s responsible for the satisfying “click” when the case snaps shut.

Rare earth magnets are in your car: in the little motors that raise and lower the windows, inside the functioning of the airbag and the seat adjustment mechanism.

And not just the little things. Most electric vehicles use rare-earth magnets in their motors, enabling them to accelerate more efficiently than the old all-copper ones.

More sensitively, from the perspective of Western governments, in the military, there are tonnes of rare earths to be found in submarines, in fighter jets, in tanks and frigates. Much of this is in the form of magnets, but some is in the form of specialised alloys.

So, for instance, there is no making a modern jet engine without yttrium and zirconium, which, together, help those metallic fan blades withstand the extraordinary temperatures inside the engine. Without rare earths, the blades would simply melt.

Yet the amount of this stuff we mine from the ground each year is surprisingly small.

According to Rob West of Thunder Said Energy, the total size of the rare earth market is roughly the same as the North American avocado market. But, says West, those numbers underplay its profound importance.

“Buyers would likely pay over 10-100x more for small but essential quantities of rare earths, if supplies were ever disrupted,” he says.

“You cannot make long-distance fibre cables without erbium. You cannot make a gas turbine or jet engine without yttrium.”

China’s dominance

In short, these things matter. And that brings us to the politics.

Right now, about 70% of the world’s rare earth elements are mined in China.

Roughly 90% of the finished products (in other words, those magnets) are made in China. China is dominant in this field in an extraordinary way.

This is not, it’s worth saying, for geological reasons.

Contrary to what the name suggests, rare earth elements aren’t all that rare. Pull a chunk of soil out of the ground and there will be trace amounts of most of them in there.

True: finding concentrated ores is a bit harder, but even here, it’s not as if they are all in China.

There are plenty of rich rare earth ores in Brazil, India, Australia, and even the US (indeed, the Mountain Pass mine in California is where rare earth mining really began in earnest).

Low cost of Chinese rare earths

The main explanation for Chinese dominance is that China has simply become very good at extracting lots of rare earths at relatively low cost.

According to figures from Benchmark Mineral Intelligence, the prevailing cost of Chinese rare earths is at least three times lower than the cost of similar minerals refined in Europe (to the extent that such things are available).

At this point, perhaps you’re wondering how China has managed to do it – to dominate global production at such low prices.

Part of the explanation, says West, probably comes down to “transfer pricing” – in other words, China being China, refiners and producers are probably able to buy raw materials at below market prices.

Another part of the explanation is that refining rare earth ores is phenomenally energy and carbon-intensive.

Most European and American firms have pulled out of the sector because it is hideously dirty.

Such qualms are less of an issue in China, especially since most of their mines, including the biggest of all, Bayan Obo in Inner Mongolia, are hundreds if not thousands of miles from the nearest city.

Energy costs are less of a constraint in a country whose grid is still built mostly on a foundation of cheap thermal coal.

Add it all up, and you end up with the situation we have today: where the vast majority of the world’s rare earths, that go into all our devices, come from dirty mines in China, produced at such a low cost that device manufacturers are happy to put them anywhere.

Anyway, that brings us to the politics.

Global trade war flaring up again

In recent months and years, China has periodically introduced controls on rare earth exports.

Last week, it announced the most serious rule change yet, essentially insisting that anyone using Chinese rare earths would have to apply for a licence from them.

It has been seen, in Washington at least, as a declaration of economic war, and, in response, Donald Trump has announced a fresh set of tariffs on China.

In short, the global trade war seems to be flaring up all over again.

Where this ends up is anyone’s guess. Tim Worstall, a former scandium expert who has been in and out of the rare earths sector for decades, suspects China might have overplayed its hand.

“The end result here is that there can be two outcomes,” he says.

“A: The entire world’s usage of rare earths is mapped out in detail, end uses, end users, quantities, and times for the Chinese state and depends upon their bureaucracy to administer.

“B: The plentiful rare earths of elsewhere are dug up, and the supply chain is rebuilt outside China.

“My insistence is that B is going to be the outcome, and it’ll be done, intervention or no.”

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In practice, the new rules may simply represent an element in China’s trade negotiations with the US.

So it’s hard to know whether they, or for that matter America’s 100% extra tariffs, will ever really bite.

Either way, it’s yet more evidence of the rocky road the global economy remains on.