Boost for Rachel Reeves as borrowing costs fall
Government borrowing costs have dropped to their lowest for eight months in a boost to Rachel Reeves.
Markets sent down the bond yields after new figures came out this morning showing that services inflation fell more sharply than expected.
The yield on 10-year gilts fell to 3.82pc, a fall of 0.07 percentage points since yesterday.
Euro zone yields stagnated, with French and German 10-year bonds virtually unchanged during trading today.
Today’s data showed that annual services price inflation fell to 5.2pc in July from June’s 5.7pc, below analyst forecasts. Bank of England staff had predicted a drop to 5.6pc.
The fall in services inflation reflected a reversal in June’s sharp increase in the cost of hotels, as well as downward pressure from air fares, roadside recovery services, package holidays and cultural services including live music.
Monica George Michail, associate economist at the National Institute of Economic and Social Research, said: “Despite the lower figures, these remain elevated and may lead the Bank of England to exercise some caution with regards to further interest rate cuts.”
Nevertheless, markets are betting on two more interest rate cuts between now and the end of the year.
It came as US inflation unexpectedly declined last month, official figures showed, “clearing the runway” for the Federal Reserve to begin cutting interest rates.
Read the latest updates below.
06:08 PM BST
John Lewis to overhaul staff roles in bid for ‘Selfridges-style’ customer service
John Lewis is set to put storeroom workers on its shop floors in a race to improve customer service and win back sales. Hannah Boland reports:
The company said it will no longer have separate backroom workers and shop floor staff in order to free up more employees to work on checkouts and serve customers in fitting rooms, for example.
As part of an overhaul to create a “Selfridges-style” level of customer service, the company said it will also change staff hours so more are working during busier times.
A spokesman for John Lewis said: “We’re seeking to make sure partners are in the right place at the right time to help customers.”
Peter Ruis, who was made executive director of John Lewis in January, is reportedly keen to replicate Selfridges’ attentive approach toward shoppers in its stores.
John Lewis said it will remove “unnecessary tasks” for staff by spending £5m on digital headsets, so workers are not wasting time tracking each other down in stores.
Thanks for joining us today on the Markets blog. Chris Price will be back in the morning with the latest from the worlds of business and finance.
05:52 PM BST
British iPhones to be opened up to Apple Pay competitors
Apple is to let rivals use the iPhone’s contactless payment chip in a move that opens up the phones to competitors to Apple Pay.
The change will reportedly taike place once the tech giant releases iOS 18.1, a forthcoming software update.
Apple said the change will allow competitors to use the chip to offer a range of services including in-store payments, electronic car keys and hotel keys.
The company said it plans to offer competition in Australia, Brazil, Canada, Japan, New Zealand, the US and UK.
The move follows pressure from regulators, but the EU, which has been the most loud of the regulators, was not mentioned by Apple in its statement today.
05:30 PM BST
European stocks rise amid boost from US inflation figures
Europe’s main stocks index rose on Wednesday, boosted by travel and leisure and financial shares. Investors drew comfort from fresh evidence of moderating inflation in the world’s largest economy that supported an early rate-cut narrative.
The pan-European Stoxx 600, which includes some of Britain’s largest companies, closed 0.5pc higher, with all the major European stock exchanges also ending in positive territory. France’s Cac 40 was up 0.8pc, while Germany’s Dax rose 0.4pc.
Data showed US consumer prices rebounded as expected in July, but the trend remained consistent with subsiding inflation, a day after moderating producer price numbers reinforced hopes that the Federal Reserve will cut rates soon.
Bill Adams, chief economist for US-based Comerica Bank, said:
The CPI report is a green light for the Fed to cut interest rates at their next decision on September 18.
05:16 PM BST
Traders less confident of a half point US rate cut
Traders are still confident of a US interest rate cut in September, but are less sure today that it will be by more than a quarter of a percentage point.
Bret Kenwell, a US investment analyst at eToro, said:
It’s no longer a question of “if” or “when” the Fed will cut rates, but rather, whether the Fed will cut by 25 or 50 basis points [quarter and half a percentage point].
04:58 PM BST
Wall Street struggles for direction as Google’s owner falls
Wall Street’s main indexes were mixed this afternoon, as Alphabet slid and as signs of moderating inflation kept bets alive that the US Federal Reserve would begin its rate cutting cycle next month.
Alphabet, best known as the owner of Google, fell as much as 3.9pc after a report said the US Department of Justice is considering options that include breaking up the online search engine. Shares are currently down by 2.6pc.
Losses in Alphabet weighed on the Nasdaq.
A rebound in megacap and technology stocks have helped markets recoup most of their losses from a global market rout earlier this month that was partly caused by data showing a surge in US unemployment rate in July.
04:54 PM BST
Footsie closes up
The FTSE 100 rose 0.6pc today, with Hikma Pharamceuticals leading the market. Its shares rose 5pc. Ladbrokes owner Entain was not far behind, rising 4.5pc. Rio Tinto was the biggest faller, down 1.5pc, followed by fellow miner Anglo American, down by a similar percentage.
Meanwhile, the mid-cap FTSE 250 rose 1pc. The top riser was gambling software firm Playtech, up 13.8pc, followed by engineering firm Dowlais, up 8.4pc. At the other end of the index, Wizz Air fell 3.7pc, while Auction Technology fell 2.8pc.
04:49 PM BST
EasyJet cancels more than 200 flights to and from Portugal due to cabin crew strike
EasyJet has cancelled 232 of the 1,138 flights to and from Portugal it had been scheduled to operate during a three-day strike by its cabin crew.
The budget airline’s cabin staff at the popular summer holiday destination will be on strike from tomorrow.
EasyJet Portugal told Reuters it had scheduled 1,138 flights for the next three days, but had to cancel about a fifth of them due to the strike.
The company said:
We are extremely disappointed with this needless strike action, especially at this important time of the year for our customers.
Our priority has been to try and minimise the impact of this strike action on our customers, which included cancelling some flights in advance in order to allow them to rearrange their travel plans.
The Portuguese government has decreed the need for minimum services during the strike, which should include flights to the island of Madeira, Geneva, Luxembourg and London.
EasyJet has 19 aircraft based in Portugal, as well as more than 800 employees there.
04:41 PM BST
Russian rouble rebounds after touching 10-month low
The Russian rouble rebounded against the dollar on Wednesday after falling for around a week on risks of escalation following Ukraine’s biggest attack on Russian territory since the start of the war.
This afternoon, the rouble was 1.7pc stronger at 89 to the dollar, according to LSEG data, gaining back some ground after losing 8.5pc since the start of Ukraine’s incursion into Russia’s southern Kursk region on August 6.
The rouble briefly touched a 10-month low against the dollar during trading on Tuesday.
04:32 PM BST
Chinese carmaker overtakes Tesla to develop world’s fastest-charging electric battery
A Chinese rival to Tesla has claimed to have developed the world’s fastest-charging electric car battery. Matthew Field reports:
Zeekr, a Chinese manufacturer backed by Volvo-owner Geely, said the new batteries for its 007 sedan could go from a 10pc to 80pc charge in 10 and a half minutes.
That is compared to Elon Musk’s Tesla, which says its Model 3 batteries can add 44pc of charge in 15 minutes.
Upgrades to battery technology should help ease so-called range anxiety among motorists – which has been one of the biggest factors preventing drivers switching from petrol and diesel to electric.
Zeekr is one of a number of fast-growing Chinese start-ups expanding aggressively across the US and Europe, with plans to launch its cars in the UK next year.
The carmaker’s new batteries are produced using cathodes made of lithium iron phosphate.
04:18 PM BST
Paddy Power owner Flutter in talks to buy Italian gambling giant
Paddy Power owner Flutter Entertainment has confirmed it is in talks with gambling software firm Playtech to buy its Italian betting business in a deal which could be worth £2bn.
Flutter said it was in discussions to acquire Snaitech, one of Italy’s biggest gambling companies.
Playtech, which provides technology for sports betting and gaming firms, said it had granted Flutter a “period of exclusivity to complete due diligence and finalise the necessary transaction documentation”.
Both parties stressed that there was no certainty over a firm offer being made.
Shares in Flutter, which owns a swathe of brands including Betfair and FanDuel, surged by more than a tenth on Wednesday with financial markets also reacting to the release of its half-year financial results.
The global sports betting business reported a 20pc increase in revenues over the three months to the end of June, compared with the same period last year, totalling $3.6bn (£2.8bn).
It also reported a 17pc jump in adjusted earnings over the period, and said it was upgrading its predictions for the full year.
The business moved its primary stock market listing from London to New York earlier this year, as part of efforts to sharpen its focus on growth in US markets.
04:09 PM BST
Hong Kong’s richest man hoovers up British wind farms in £350m deal
Hong Kong’s Li Ka-shing has bought a portfolio of 32 onshore wind farms for £350m in a deal that will tighten the billionaire’s grip on Britain’s energy market. Jonathan Leake reports:
The deal was announced by the 96-year-old’s CK Group on Wednesday, building on a buying spree that has already seen it acquire a number of utility projects in the UK.
Under the terms of the agreement, which has been struck with Aviva Investors, CK Infrastructure will acquire wind farms such as the 18MW Den Brook wind farm in Devon and the 25MW Minnygap project near Dumfries in Scotland.
CK Group, which is listed in Hong Kong, is already one of the biggest gas, electricity and water distributors in the UK.
Its assets include UK Power Networks, the distribution network operator which it bought for £5.5bn in 2010, and the Port of Felixstowe, the UK’s biggest container port. It also holds major stakes in Northern Gas Networks and Northumbrian Water.
Elsewhere, it controls gas and electricity assets in Canada, Australia and New Zealand.
04:05 PM BST
Global stocks hold firm as hopes of US rate cuts stay alive
Global stocks held steady today after data showed US consumer prices rose moderately in July, as expected, reinforcing investor bets that the Federal Reserve could start cutting interest rates soon.
But the size of the Fed’s first cut, which many investors are hoping will take place in September, is still in doubt as the market debates the chances of a quarter or half point reduction.
Gennadiy Goldberg, head of US rates strategy at TD Securities in New York, said:
The one thing that was surprising here [in the inflation figures] was rent accelerating. I think that’s the reason for the market’s somewhat disappointed reaction, even though the print actually came in on the weaker side of consensus.
I do think the market is reassessing the odds of a 50 basis-point rate cut in September.
On Wall Street, the S&P 500 is up 0.6pc, while the Dow Jones Industrial Average is up 0.2pc. The Nasdaq Composite is down 0.2pc.
The MSCI World gauge of global stock prices is up 0.4pc.
03:50 PM BST
Government borrowing costs fall to lowest this year after inflation surprise
British Government borrowing costs have dropped to their lowest for eight months after services inflation fell more sharply than expected.
The yield on 10-year gilts fell to 3.82pc, a fall of 0.07 percentage points since yesterday, while euro zone yields stagnated.
French and German 10-year bonds were virtually unchanged during trading today.
Today’s data showed that annual services price inflation fell to 5.2pc in July from June’s 5.7pc, below all forecasts in a Reuters poll and the lowest since June 2022. Bank of England staff had predicted a drop to 5.6pc.
The fall in services price inflation reflected a reversal in June’s sharp increase in the cost of hotels, as well as downward pressure from air fares, roadside recovery services, package holidays and cultural services including live music.
Monica George Michail, associate economist at the National Institute of Economic and Social Research, said:
Despite the lower figures, these remain elevated and may lead the Bank of England to exercise some caution with regards to further interest rate cuts.
Nevertheless, markets are betting on two more interest rate cuts between now and the end of the year.
03:35 PM BST
Gas prices volatile amid Ukraine conflict
Gas prices have been volatile amid the ongoing battles after Ukraine pushed into Russian territory last week.
Europe’s benchmark contract was last flat at about €39 per megawatt hour having swung between gains of as much as 2.1pc and losses of as much as 1.9pc.
Prices jumped 10pc last week to their highest point this year - as high as €42 per megawatt hour - after battles around a key transit point near the Ukraine border.
Ukrainian forces have today shot down one of Russia’s most expensive fighter jets over the Kursk region, Kyiv’s top general said on Wednesday.
I am heading off now but, fear not, Alex Singleton will keep sending live updates for the rest of the day.
03:11 PM BST
Scotland’s deficit grows amid plunging North Sea revenues
Scotland’s deficit has increased by more than £4.5bn in the past year, data shows, as revenues from North Sea oil and gas halved.
The Government Expenditure and Revenue Scotland (Gers) figures show a net fiscal deficit of £22.7bn in 2023-24, compared to just over £18bn the previous year.
As a percentage of the country’s GDP, the deficit has increased from 8.4pc to 10.4pc, compared to the UK deficit which fell from 5pc to 4.5pc in the same period.
It comes as offshore oil and gas revenues from the North Sea plunged from £9.9bn to £4.9bn.
Total revenue increased in Scotland from £86.9bn to £88.5bn but government expenditure per person is £2,417 higher than the rest of the UK.
Some £20,418 was spent on average for every single person north of the border.
Scottish Finance Secretary Shona Robison said the deficit is “not a reflection on the finances or policies of the Scottish Government - it is a reflection of UK Government choices”.
She added: “As an independent nation, we would have the powers to make different choices.”
02:54 PM BST
Rising rail fares ‘will mean more people working from home’
Telegraph readers have described the cost of travel as “absolute insanity” after the latest jump in inflation left commuters facing a rise of around £200 to annual rail season tickets.
Here is a round up of some of your fellow readers’ views and join the conversation here.
02:35 PM BST
US stocks rise as inflation eases
Wall Street’s main indexes opened slightly higher after data showed inflation was moderating as expected, cementing bets that the Federal Reserve will begin cutting interest rates next month.
The Dow Jones Industrial Average rose 34.9 points, or 0.1pc, at the open to 39800.59.
The S&P 500 rose 7.9 points, or 0.2pc, at the open to 5442.36​, while the Nasdaq Composite rose 40.0 points, or 0.2pc, to 17227.64.
02:26 PM BST
Mars to buy Pringles maker Kellanova for nearly £28bn
M&M’s and Snickers maker Mars said that it would acquire snack food business Kellanova, marking a multibillion dollar agreement set to result in a new industry giant.
The all-cash transaction would value Kellanova - which is behind snacks like Pringles and Pop-Tarts - at $35.9bn (£27.9bn).
The deal “accelerates ambition to double Mars Snacking in the next decade, in alignment with global consumer demand trends,” said Mars in a statement.
It added that the move would also bring two new billion-dollar brands, Pringles and Cheez-It, into its business.
“Snacking is a large, attractive and durable category that continues to grow in importance with consumers,” Mars added.
Kellanova had net sales in 2023 of more than $13bn, and is present in 180 markets with some 23,000 employees.
The statement added that most of Kellanova’s snack brands outperform competitors, especially among Gen Z and millennial buyers.
02:12 PM BST
US stocks poised to rise as ‘soft landing is still in prospect’
US stock indexes turned higher in volatile premarket trading after data showed headline inflation fell more than expected in July.
A Labor Department report showed the consumer price index (CPI) rose 2.9pc in July, compared to an estimated 3pc rise.
The core figure, which excludes volatile food and energy components, came in at 3.2pc as expected.
In premarket trading, the Dow Jones Industrial Average was up 0.1pc, while the S&P 500 and Nasdaq 100 had gained 0.2pc.
Garry White, chief investment commentator at Charles Stanley, said:
US inflation data was bang in line with market expectations, showing only a modest increase in July. This data is likely to cement prospects of an interest rate cut at the Federal Reserve’s September meeting.
Markets had been fretting that the US central bank was behind the curve with interest rate cuts and a sharp slowdown or recession was likely as a result.We think these concerns were over-exaggerated and a soft landing is still in prospect for the world’s largest economy. The US jobs market remains robust, if slowing, and the recent correction in technology-sector valuations was a healthy event.
02:07 PM BST
Expect a quarter of a point rate cut from the Fed, say economists
Consumers should expect a quarter of a percentage point interest rate cut next month in the US rather than a half a point cut, according to economists, following the latest decline in American inflation.
Traders are agreed that the Fed will cut interest rates in September but are divided on how big the reduction in borrowing costs will be.
Paul Ashworth, chief North America economist at Capital Economics, said:
In short, this CPI report represents more good data and adds to the evidence supporting a 25bp September rate cut.
Overall, July’s CPI report is probably best described as mildly encouraging – it adds support for a 25bp rate cut in September but, at the same time, doesn’t suggest price pressures are collapsing in a way that could warrant a bigger 50bp reduction.
01:59 PM BST
US inflation ‘clears the runway’ for interest rate cuts
US inflation unexpectedly declined last month, official figures showed, “clearing the runway” for the Federal Reserve to begin cutting interest rates.
The consumer prices index rose 2.9pc in July, down from 3pc in June, where it analysts had expected it to remain.
The pound remained lower against the dollar after figures today showing UK inflation rose for the first time this year, although by a smaller than expected margin.
Traders remain certain that the Fed will begin cutting interest rates at its next meeting in September but are still divided on whether this will be by half a percentage point or a quarter of a point.
Richard Carter, head of fixed interest research at Quilter Cheviot, said:
Today’s US inflation figure clears the runway for the Federal Reserve to initiate a rate cut at its September meeting.
The 2.9pc reading is just under expectations of 3pc, while core inflation has remained stable at 3.2pc.
The last thing the Fed and the market will have wanted prior to the next meeting was any surprises in the data, and while some may still appear, inflation is at least playing ball and that is the most important data point to consider still.
Clearly there is some concern that the economic slowdown in the US is more severe than is currently being presented by the data. This has caused market jitters of late, but investors should be calmed knowing that rate cuts are coming.
01:43 PM BST
Pound remains down as US inflation falls
The pound remained lower despite the fall in US inflation last month, which has cemented bets that the Federal Reserve will cut interest rates at its next meeting in September.
Sterling was down 0.2pc against the dollar to $1.284 having already been pushed lower by a larger-than-expected decline in UK services inflation, which reassured markets that prices are not about to accelerate.
01:34 PM BST
Fed told it’s ‘time for interest rates to fall’ as inflation falls
After US inflation fell slightly more than expected, Charles Schwab UK managing director Richard Flynn said:
Today’s figures show that the rate of inflation has fallen compared to last month.
This drop reinforces the message that recent labour figures have made clear to the Federal Reserve: it’s time for interest rates to fall.
While investors have begun to price in a rate cut at the September meeting, we have seen dramatic moves in the market this month – volatility that reflects residual uncertainty about the outlook for the market.
Although today’s lower CPI reading is another convincing piece of evidence in favour of less restrictive monetary policy, we expect that the market will remain highly sensitive to economic data releases until a September slash is locked in.
01:30 PM BST
US inflation unexpectedly falls to 2.9pc
US inflation unexpectedly fell last month in a boost to hopes for a bumper interest rate cut by the Federal Reserve in September.
The consumer prices index rose by 2.9pc, having been expected to remain unchanged at 3pc from the previous month, official figures showed.
Money markets had been split on whether the Fed would announce a quarter of a point of half a percentage point interest rate cut at the next meeting in September.
01:22 PM BST
Housebuilder stocks surge after inflation surprise
Housebuilding stocks have risen at their fastest pace in two months as traders priced in two interest rate cuts before the end of the year.
Housing developers across the FTSE 100 and FTSE 250 have climbed 2.6pc - their biggest rise since June - after inflation rose by less than expected in July.
The official figures also showed services inflation fell faster than expected, leading traders to ramp up bets on rate cuts.
The Bloomberg UK Homebuilder Index rose as much as 2.3pc, putting it on track for its highest close since March 2022.
Falling expectations for interest rates will likely encourage lenders to reduce mortgage rates, fuelling demand in the housing market.
Sanjay Raja, chief UK economist at Deutsche Bank, said:
While not our base case, the odds of a back-to-back rate cut are on the rise.
A September rate cut should no longer be off the table. And it’s entirely conceivable to think that we could get multiple more rate cuts this year.
01:09 PM BST
Tui hails ‘strong demand’ for summer holidays
In company news, Tui has said “strong demand” for holidays this summer has helped the travel giant deliver record revenues for the past quarter.
Europe’s largest tour operator posted growth despite a backdrop of economic uncertainty and delays in plane deliveries affecting other travel firms.
The business, which has benefited from the bankruptcy of German rival FTI, told shareholders that group revenues grew by 9pc to €5.8bn (£5bn) over the three months to the end of June.
Tui said bookings for this summer were up 6pc while prices were 3pc higher, amid “strong demand” for summer 2024.
It added that it has seen “promising” bookings for the winter season.
The company, which abandoned the London Stock Exchange in favour of listing purely in Germany earlier this year, maintained its financial guidance for the financial year.
Tui group chief executive officer Sebastian Ebel said: “For the eighth consecutive time, we are reporting double-digit growth in underlying EBIT (earnings before interest and tax).
“In a market environment that remains challenging, this also demonstrates the strength and future viability of our business model.”
12:53 PM BST
Oil little changed as US inflation figures loom
Oil prices have held around $81 a barrel ahead of the next US inflation figures.
Prices were up as much as 0.9pc today but are now flat after lacklustre eurozone employment and GDP data.
Brent crude and West Texas Intermediate both fell by about 2pc on Tuesday after the International Energy Agency flagged a global surplus later this year if the Opec+ cartel proceeds with plans to restore production in October.
Opec had also trimmed its forecasts for global demand over this year and next, blaming downward revisions for China’s outlook.
There is a small chorus of voices saying that Brent still has room to advance.
Citigroup analysts flagged geopolitical and weather-related risks, while Goldman Sachs said financial demand for crude derivatives should rebound from last week’s record low.
Both banks say Brent could climb to the mid-$80s level.
12:31 PM BST
US stocks flat ahead of inflation data
Wall Street’s main stock indexes were little changed in premarket trading as investors refrained from large bets ahead of US inflation figures, which could offer clues on the pace of interest rate cuts from the Federal Reserve.
The US consumer prices index is expected to show headline inflation grew 3pc in July, the same as June.
Both the S&P 500 and the Nasdaq clocked their fourth straight session of gains on Tuesday following softer-than-expected producer prices data that indicated inflation continued to moderate.
A rebound in megacap and technology stocks have helped markets recoup most of their losses from a global market rout earlier this month that was partly caused by data showing a surge in US unemployment rate in July.
Also, Atlanta Federal Reserve President Raphael Bostic said on Tuesday he wants to see “a little more data” before he’s ready to support lowering interest rates.
Traders broadly expect the Fed to begin cutting interest rates in September but are near evenly split whether it would be a quarter of a point cut or by half a percentage point.
In premarket trading, the Dow Jones Industrial Average and S&P 500 were flat and the Nasdaq 100 was down 0.1pc.
12:04 PM BST
Why rising inflation doesn’t spell disaster for your mortgage
Borrowers looking to take out a mortgage will likely shudder when hearing that inflation is on the rise again.
Our senior economics reporter Eir Nolsøe reveals why it is not a huge blow for mortgage borrowers:
Even as consumer price rises increased by 2.2pc in the year to July, up from 2pc the previous month, a small sigh of relief is warranted.
Economists had widely predicted an uptick in the headline inflation rate, although the increase reported on Wednesday eased traders’ concerns after it was less than the 2.3pc expected.
Inflation rising above the Bank of England’s 2pc target to 2.2pc hardly seems like news worth celebrating – but the fact that traders had predicted a rise of 2.3pc means things could certainly be worse.
These charts explain why the underlying figures will give rate-setters at the Bank of England and borrowers some reasons to be cheerful.
11:54 AM BST
Hedge fund makes £210m from global market turmoil
A hedge fund has been named as the biggest victor so far from the global market turmoil which sent stock indexes plummeting.
Caxton Associates has made about $270m (£210m) this month after bets on US government debt and the Japanese yen, according to the Financial Times.
Global stocks were sent sharply downward amid fears of a US recession and the sharp unwinding of so-called “carry trades” in the yen after the Bank of Japan announced a surprise increase in interest rates.
The London-based firm made 3.9pc in its $4.5bn Macro fund, which is personally managed by chief executive Andrew Law, during the first nine days of August, according to numbers seen by the FT.
11:34 AM BST
Commuters face £200 rise in rail fares after latest jump in inflation
Commuters face a rise of around £200 to annual rail season tickets after the latest jump in inflation.
Rail fares are expected to rise by at least 3.6pc next year after the latest inflation figures were published by the Office for National Statistics.
The consumer prices index (CPI) rose for the first time this year in July, rising to 2.2pc from 2pc.
However, the cost of rail tickets have traditionally been set using the outdated retail prices index (RPI) measure of inflation, which is no longer considered a national statistic because officials do not consider it an effective gauge of price rises.
Westminster governments have used RPI’s July figure to set the cap on annual increases in regulated fares in England.
The figure jumped from 2.9pc to 3.6pc last month, which would add around £201 to the cost of an annual rail season ticket from Reading to London, which currently costs £5,600.
However, the Department for Transport (DfT) has not revealed whether this will be used to determine changes in the cost of train travel.
The rise in fares in 2023 was based on the UK’s average earnings growth during the quarter to July 2022, while a figure of 4.9pc - not believed to be linked to any specific economic measure - was used for the 2024 increase.
About 45pc of fares on Britain’s railways are regulated by the Westminster, Scottish and Welsh Governments. They include season tickets on most commuter journeys, some off-peak return tickets on long-distance routes, and flexible tickets for travel around major cities.
A DfT spokesman said: “The Transport Secretary is delivering the biggest overhaul of our railways in a generation, to provide better services for passengers, while saving millions of pounds in fees paid to the private sector.
“No decisions have been made on next year’s rail fares but our aim is that prices are as affordable as possible for passengers.”
11:13 AM BST
Inflation surprise shows Bank of England ‘too slow to cut interest rates’
The Bank of England has been too slow to begin cutting interest rates, a think tank has warned, as it said unnecessary damage has been done to the British economy.
Andrew Lilico, economics fellow at the Institute of Economic Affairs think tank, said:
Today’s inflation figures support the case that the Bank of England has been too slow in cutting rates.
Overall, the picture indicates that inflation is likely to undershoot the Bank’s expectations and supports the IEA’s Shadow Monetary Policy Committee’s long-held case that concerns about inflation being persistent based on a wage-price spiral are misplaced.
Just as the Bank was too slow to raise raises as inflation rose, failing to see the clear signs there were in the monetary data, so as inflation has fallen it has been too slow once again, allowing monetary growth to be too low for too long and failing to grasp its significance.
This is unnecessarily impeding growth at a time the economy should be seizing the opportunity for investment in emerging new technologies.
Failing to take full advantage of this moment could mean a lasting failure to boost UK growth – a boost that is sorely needed.
10:58 AM BST
House prices rise by 2.7pc
Average UK house prices increased by 2.7pc to £288,000 year to June, according to the Office for National Statistics.
This is unchanged from the revised estimate for the 12 months to May.
Average UK private rents increased by 8.6pc in the year to July, unchanged from the previous month.
Average UK house prices increased by 2.7%, to £288,000 in the year to June, unchanged from the revised estimate for the 12 months to May.
Read the release ➡️ https://t.co/tbJnxzB2Xt pic.twitter.com/LhshQlBICg— Office for National Statistics (ONS) (@ONS) August 14, 2024
10:26 AM BST
Eurozone jobs market weakens
Companies across the eurozone hired staff at a slower pace during the second quarter of the year, official figures show.
Employment grew 0.2pc in the three months to June, down from 0.3pc over the previous quarter, according to Eurostat.
It comes amid declining confidence in Germany - Europe’s largest economy.
Money markets indicate the European Central Bank will cut interest rates two more times this year in response to the bloc’s weakening economy, with growth remaining at 0.3pc in the second quarter.
Euro area #employment +0.2% in Q2 2024, +0.8% compared with Q2 2023: flash estimate from #Eurostat https://t.co/rXsEeDnDSB pic.twitter.com/wUmP8Qt8Ti
— EU_Eurostat (@EU_Eurostat) August 14, 2024
10:04 AM BST
Eurozone economy grows 0.3pc
The eurozone economy rose by 0.3pc in the second quarter of the year, in line with economists’ expectations.
Euro area #GDP +0.3% in Q2 2024, +0.6% compared with Q2 2023: flash estimate from #Eurostat https://t.co/rXsEeDnDSB pic.twitter.com/JejLjc1M9b
— EU_Eurostat (@EU_Eurostat) August 14, 2024
09:54 AM BST
UK borrowing costs ease despite bond market slump
The Government’s borrowing costs have fallen after inflation rose less than expected, defying a slump in global bond markets.
The yield on 10-year UK gilts - the return the government promises to pay buyers of its debt - fell by three basis points to 3.86pc.
Meanwhile, yields on eurozone and US bonds all rose ahead of GDP data for the single currency bloc and the latest US inflation figures out, later today. Yields move inversely to bond prices.
The fall in UK debt costs come as inflation rose by less than expected, raising hopes for interest rate cuts later this year.
09:48 AM BST
Aviva boosted by higher insurance premiums
In corporate news, insurance giant Aviva has revealed higher sales and profits on the back of “excellent trading” over the past six months.
The London-listed company said it was buoyed by a jump in UK general insurance premiums, while sales from its retirement division dipped.
It reported an operating profit of £875m for the first half of 2024, up 14pc on the same period a year earlier. This was ahead of analyst expectations.
Shares were down 0.6pc even as the company reported that general insurance premiums grew by 15pc to £6bn across the whole group, with an 18pc rise in the UK and Ireland.
Premiums in the UK and Ireland rose as higher pricing and new propositions helped drive a 30% increase for personal lines insurance, with commercial lines up 10pc.
Aviva also benefited from 49pc growth in its protections business, driven by its acquisition of AIG Life earlier this year.
Group chief executive Amanda Blanc said:
Sales are up, operating profit is up, the dividend is up.
Our plan to deliver more for customers and shareholders is working really well.
09:39 AM BST
Inflation worse for poorer households as prices rise fastest on cheapest goods, says IFS
Poor households have suffered far higher price rises than rich families as the cost of the cheapest food brands spiralled much more quickly than premium products, according to the Institute for Fiscal Studies.
Our deputy economics editor Tim Wallace has the details:
A wave of “cheapflation” has swept the nation, the analysts said, as the cheapest types of food and drinks, including pasta, butter and milk, soared in price by more than one third in the cost of living crisis.
Between September 2021 and September 2023 those products’ prices jumped by 36.2pc. By contrast the most expensive versions of those same foods went up by only 15.8pc over the same period - less than half the pace.
It means the poorest 25pc of households overall suffered an inflation rate which was 5.6 percentage points higher than that felt by the richest 25pc.
That is equivalent to an extra £100 on the annual shopping basket for those families with the lowest incomes, the IFS said.
On top of that, poorer households spend a greater share of their incomes on essentials such as food and energy, which went up particularly sharply in the wake of the pandemic and the Russian invasion of Ukraine.
Researcher Tao Chen said: “Widespread ‘cheapflation’ pushed up the prices of the most inexpensive varieties of grocery products over the last two years. This hit poorer households harder. Individual households will almost always experience a different rate of inflation to headline numbers such as the CPI because these measures are based on average consumer spending patterns across the economy.”
09:22 AM BST
‘My pocket tells me that inflation has increased more than 2.2pc’
Your fellow Telegraph readers are concerned that public sector pay awards and potentially premature interest rate cuts could push inflation even higher, after rising for the first time this year.
Here are a selection of viewpoints from the comments section below and you can join the debate here.
09:04 AM BST
European shares rise ahead of eurozone growth figures
European shares opened higher as investors awaited the latest inflation figures from the US and the second quarter growth figures from the eurozone.
The pan-European Stoxx 600 was up 0.4pc to trade near a two-week high, while the Cac 40 in Paris had gained 0.6pc and the Dax in Frankfurt was up 0.4pc.
Investors will also look at employment and GDP estimates for the eurozone out this morning.
Shares have already been boosted by data on Tuesday showing US producer prices increased less than expected in July, reinforcing market view that cooling inflation will prompt the Federal Reserve to cut interest rates soon.
US consumer prices inflation figures will be published this afternoon.
Among individual stocks, UBS gained 1.8pc as Switzerland’s largest bank posted a net profit of $1.1bn (£857m) for the second quarter, comfortably surpassing analysts’ forecast.
Straumann soared 12.1pc after the dental implant maker announced the sale of its DrSmile aligner business and also raised its full-year outlook.
08:48 AM BST
FTSE 100 rises as traders ramp up bets on interest rate cuts
UK stocks advanced as inflation rose less than expected last month, strengthening bets that the Bank of England will cut interest rates at its next meeting.
The FTSE 100 climbed 0.5pc to hit a two-week high, while the midcap FTSE 250 index was also 0.5pc higher.
All sectors of the London market gained apart from industrial metal miners, which that slipped as much as 1.1pc as base metals were under pressure after a bigger-than-expected drop in Chinese lending.
The consumer prices index measure of inflation rose to 2.2pc after two months at the Bank of England’s 2pc target, a slightly smaller increase than economists expected, while the closely watched services inflation slowed sharply.
The pound slid 0.2pc against the dollar and the money markets raised their bets of Bank of England cutting rates next month from 36pc to 45pc. Traders have also now priced in two interest rate cuts by the end of the year.
Among stocks, Aviva fell 0.4pc despite the British insurer posting a better-than-expected 14pc increase in first-half operating profit, helped by a rise in general insurance premiums in Britain and Ireland.
Flutter jumped 11.3pc and was set for its best day in eight months as the world’s largest online betting company raised its full-year outlook after a much better-than-expected second quarter.
08:36 AM BST
End of the Taylor Swift effect helps ease inflation
Inflation rose by less than expected in part thanks to the end of the “Taylor Swift effect”, which had seen hotel prices pushed higher by the arrival of her record-breaking Eras Tour in June.
Prices for restaurants and hotels fell by 0.4pc between June and July this year, compared with a rise of 0.9pc a year ago, according to the ONS.
The annual rate rose by 4.9pc in the year to July, down from 6.3pc in the year to June, which was almost entirely because of the price of hotels, which saw a monthly fall of 6.4pc compared with a rise of 8.2pc a year ago.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said:
The Taylor Swift effect appears to have a slight hand in these figures, as the main downwards pressure on inflation was a fall in hotel room costs from June, when she was on her UK tour.
Pop star Pink’s UK appearances also saw spikes in prices in some cities in June. It now seems more unlikely that the surge-pricing effect will turn into a recurrent inflationary pressure, as it clearly depends on the brightness of the stars.
Neil Rudge, chief banking officer for commercial at Shawbrook, added: “While a rise in inflation is always disappointing, it’s crucial to recognise that this increase is largely driven by specific factors including a comparatively smaller drop in the price of household energy - perhaps the “Taylor Swift effect” is in play after all where heightened demand for travel, accommodation, and related services temporarily inflated prices, so there’s no need for concern just yet.”
08:28 AM BST
Core inflation falls more than expected
Core inflation, which strips out volatile food and energy prices, fell by more than expected last month, according to the ONS.
Core CPI was down from 3.5pc to 3.3pc. Analysts had forecast a fall to 3.4pc.
Ed Monk, associate director for personal investing at Fidelity International, said:
A rise in the headline rate of inflation today is less important than a slight easing in core inflation - down from 3.5pc to 3.3pc - which suggests the trajectory for price rises is still downwards.
Easing wage rises reported yesterday point to a similar trend and suggest we remain on track for further cuts to interest rates in the months ahead.
08:23 AM BST
UK ‘in good shape compared to others globally’
As inflation rose by less than expected, Neil Birrell, chief investment officer at Premier Miton Investors, said:
Overall, year on year inflation was still up a little last month, but that was a known effect of historic energy prices.
The good news is that it came in below expectations, driven by a bigger than expected fall in services inflation in July.
That gives hope that the Bank of England can continue to ease policy even in the face of other strong data in the jobs market.
The UK economy looks to be in good shape compared to others globally.
08:15 AM BST
Chancellor must not use inflation to justify higher taxes, says Hunt
After inflation rose for the first time this year, shadow chancellor Jeremy Hunt said:
Today’s figures show how important it is that the new Labour government follows the path of the previous Conservative government and focus on keeping inflation low.
In government, we took the difficult decisions to reduce inflation from 11.1pc to the Bank of England’s target of 2pc – paving the way for the first interest rate cut in four years. However, there is clearly more to be done to keep inflation down.
The Chancellor must not use this data as an excuse to break her promises and hike up taxes. Tax rises she had planned all along.
08:06 AM BST
UK markets jump as inflation better-than-expected
Stock markets in London jumped after inflation rose by less than expected and prompted traders to price in two interest rate cuts by the Bank of England this year.
The FTSE 100 jumped 0.7pc to 8,288.60 while the midcap FTSE 250 rose 0.7pc to 20,877.98.
08:00 AM BST
Traders bet on two interest rate cuts this year after inflation surprise
Traders are betting that the Bank of England will cut interest rates twice by the end of the year after services inflation fell more sharply than expected.
Money markets are pricing in two cuts over the Bank’s next three meetings, having priced in an 82pc chance of such an outcome before the latest inflation figures were published.
The consumer prices index measure of inflation rose by less than expected from 2pc to 2.2pc in July, with closely watched services inflation falling more sharply than forecast from 5.7pc to a two-year low of 5.2pc.
Ruth Gregory, deputy chief UK economist at Capital Economics, said the data will “reassure the Bank of England that the disinflation process is on track and opens the door to more interest rate cuts later this year”. She said:
Importantly for the Bank of England, the decline in services inflation from 5.7pc to 5.2pc was much bigger than anyone anticipated. That was well below the 5.6pc rate forecast by the Bank in August, although closer to our own forecast of 5.4pc.
This may not alleviate the Bank’s concerns about persistent price pressures entirely. And it probably isn’t enough to prompt a back-to-back interest rate cut in September.
But it does lend some support to our view that CPI inflation will be back below the 2pc target next year and that interest rates will fall further and faster than markets expect.
Accordingly, we are sticking to our view that the Bank will pause in September, and that fading services inflation will mean rates fall to 4.5pc this year and 3pc next year.
07:47 AM BST
Bosses face higher business rates as inflation ticks up
The rise in inflation has delivered a blow to retailers who fear potentially higher business rates.
The increase in business rates is calculated on the inflation rates in September, and bosses fear the rise in July does not bode well.
Kris Hamer, director of insight of the British Retail Consortium, said:
With headline inflation showing signs of rising further, retailers face the prospect of another large rise in business rates next year, which are based on September inflation rates.
This penalises the retail industry, as retail products currently have generally lower inflation levels than the headline figure on which business rates rises are based.
The Government should buy into retail by ending the 14 years of Conservative business rates rises, which have seen the multiplier increase by a third since 2010, harming the viability of many high street stores across the country.
07:41 AM BST
Pound falls amid better-than-expected services inflation
The value of the pound has dropped in the wake of the latest inflation figures, which showed that closely watched services CPI fell at a faster pace than expected last month.
Sterling was down 0.3pc against the dollar to $1.283 and had fallen 0.4pc versus the euro, which is worth 85.7p.
07:38 AM BST
Inflation ups and downs ‘part of the process’, say estate agents
Inflation fluctuations are to be expected, estate agents have said, as the industry hopes the Bank of England will continue cutting interest rates to stimulate the housing market.
Nathan Emerson, chief at estate agent body Propertymark, said:
The pathway to a strong and stable economy does come with ups and downs along the way, so today’s fluctuation, while disappointing, is an unfortunate but accepted part of the process.
Households remain in a stronger position than only twelve months previous, but there is potential the Bank of England may reflect on today’s figures very carefully when the Monetary Policy Committee next meet to decide on interest rates.
While Propertymark is keen to see a further lowering of interest rates, it’s essential to bear in mind this process must be carefully considered to keep the economy firmly on track.
07:28 AM BST
Services inflation still higher than eurozone
The latest rise in inflation is likely to set the tone for the Bank of England’s next interest rate decision in September, where most economists predict they will hold rates and wait until November before cutting borrowing costs again.
Officials expect inflation will continue to nudge up for the rest of 2024 before falling gradually again.
The closely-watched annual rate of CPI services price inflation fell to 5.2pc in July, down from 5.7pc in June, its lowest rate since June 2022.
However, that figure remains higher than in the neighbouring eurozone:
ps. for comparison, here are the latest data for the #euro area 👇
(UK headline #inflation is lower, but core and services are higher - partly reflecting the relative strength of the economic recovery and tighter labour market)https://t.co/3L6hkUJIBS pic.twitter.com/lWk5bVe5dL— Julian Jessop FRSA (@julianHjessop) August 14, 2024
07:23 AM BST
Services inflation falls by more than expected
Despite the rise in headline inflation, the crucial services measure of inflation fell by more than expected last month.
Services CPI inflation dropped for a sixth consecutive month from 5.7pc to 5.2pc, having been forecast by analysts to fall to 5.5pc.
The Bank of England has made clear that it wants to see services inflation fall before it will feel confident cutting interest rates further.
Yael Selfin, chief economist at KPMG UK, said:
Despite a modest rise, inflation was relatively subdued in July as weaker core and food price inflation largely offset the diminishing impact of earlier falls in energy prices.
This should provide a degree of comfort for MPC members as the Bank’s own forecasts earlier this month pointed to a sharper uptick.
Crucially, domestic inflationary pressures are beginning to ease, with service price inflation falling for a second month in a row to 5.2pc.
As pay growth continues to slow, this should allow firms to scale back on planned price rises without affecting margins. However, this may not be sufficient to prevent a temporary pick-up in headline inflation, which could bring the headline rate back to 3.1pc by the end of the year.
07:11 AM BST
Government ‘under no illusion’ about challenge, says minister
After inflation increased for the first time in more than a year, Chief Secretary to the Treasury Darren Jones said:
The new Government is under no illusion as to the scale of the challenge we have inherited, with many families still struggling with the cost of living.
That is why we are taking the tough decisions now to fix the foundations of our economy so we can rebuild Britain and make every part of the country better off.
07:10 AM BST
Slower pace of falling energy costs drives rise in inflation
ONS chief economist Grant Fitzner said:
Inflation ticked up a little in July as although domestic energy costs fell, they fell by less than a year ago.
This was partially offset by hotel costs, which fell in July after strong growth in June.
The increase in cost of goods leaving factories slowed a little in the year to July, led by falling petrol prices.
Meanwhile, raw materials prices picked up for the first time in over a year, driven by smaller falls in gas and electricity costs.
07:03 AM BST
Inflation rises for first time this year in blow for Starmer
Inflation has risen for the first time this year, official figures show, in a blow to Sir Keir Starmer after his first month in power.
The consumer prices index (CPI) rose by 2.2pc in July, up from 2pc in both May and June, according to the Office for National Statistics. This was less than the 2.3pc rise expected by analysts.
It is the first time CPI has risen since December 2023 after the Bank of England raised interest rates to 16-year highs to bring down inflation, which hit a peak of 11.1pc in October 2022 after a sharp rise in energy prices sparked by Russia’s invasion of Ukraine.
Rising inflation is unhelpful for the Prime Minister, as it erodes living standards at a time when he is warning the public his new Labour government will “have to do really tough things to move the country forward”.
Governor Andrew Bailey struck a cautious tone earlier this month after announcing the first cut in interest rates in four years from 5.25pc to 5pc after inflation dropped back to the Bank of England’s 2pc target.
Catherine Mann, a fellow member of the Monetary Policy Committee that sets interest rates, said this week that the UK should not be “seduced” into thinking inflation will stay low over the coming year.
The Bank of England has said it expects inflation to rise to about 2.75pc in the second half of this year, amid persistent price rises in the service sector and strong wage growth across the jobs market.
Inflation will then fall back over the subsequent years to 1.7pc in 2026, it predicted earlier this month, then down to 1.5pc in 2027.
CPI rose by 2.2% in the 12 months to July 2024, up from 2.0% in June 2024, mainly driven by prices of gas and electricity falling by less than a year ago.
Read the release ➡️ https://t.co/yVx4Eus6TJ pic.twitter.com/X3P2QsS4Kv— Office for National Statistics (ONS) (@ONS) August 14, 2024
07:01 AM BST
Good morning
Thanks for joining me. We begin with official figures showing inflation rose last month for the first time since February last year.
The Office for National Statistics revealed the consumer prices index increased by 2.2pc in July, compared to 2pc in both May and June.
5 things to start your day
1) Record number of children on disability benefits after autism and ADHD surge | Concerns over rising bill as parents of more than 730,000 under-18s claim tax-free allowance
2) Britain to seize Europe’s media crown after Taylor Swift extravaganza | Impact of the Eras tours along with rebound in cinema spending will boost UK’s standing
3) BP to help Nasa establish base on the Moon | The deal comes amid rising concerns about potential Chinese domination of space
4) Solicitor disciplined for showing sexual photo to colleague in courtroom | Tribunal says inappropriate conduct damages public trust in legal profession
5) Jeremy Warner: Idle Britain is becoming fertile ground for violence, resentment and crime | The summer riots highlight how entrenched worklessness is making civil unrest all the more likely
What happened overnight
Asian shares traded mixed as Japan’s benchmark ran out of steam after news the prime minister will not seek re-election as head of the ruling party.
Japan’s benchmark Nikkei 225 was down 0.1pc at 36,192.93. Australia’s S&P/ASX 200 gained 0.5pc to 7,869.40. South Korea’s Kospi added 0.7pc to 2,640.10.
Hong Kong’s Hang Seng lost 0.3pc to 17,127.65, while the Shanghai Composite shed 0.4pc to 2,857.90.
Prime Minister Fumio Kishida’s public support ratings are sagging lately amid a scandal involving shady money, as well as his overall lack of popularity with voters, according to Japanese media polls.
Japan’s ruling Liberal Democratic Party controls the majority in the lower house of parliament, which picks the nation’s leader.
In America, stocks jumped and bond yields fell on Tuesday after data showed that US producer prices increased less than expected in July, reinforcing market expectations that cooling inflation will allow the Federal Reserve to cut interest rates soon.
The S&P 500 jumped 1.7pc to 5,434, the Dow Jones Industrial Average added 1pc to 39,766 and the Nasdaq Composite climbed 2.4pc, closing at 17,188.
Yields on benchmark 10-year US Treasury bond slipped to 3.85pc from 3.90pc late on Monday.