We also have an unexpected interest rate hike today!

Istanbul’s central bank has raised its overnight lending rate by two percentage points in a surprise meeting, a day after turmoil swept the Turkish markets.

The. move lifts Turkey’s overnight rate to 46%, to support the lira a day after the arrest of the mayor of Istanbul, Ekrem İmamoğlu, a key challenger to president Recep Tayyip Erdoğan.

Time to recap.

The Bank of England has said UK businesses are freezing their hiring plans in response to Rachel Reeves’s tax increases and to mounting global uncertainty as it kept interest rates on hold at 4.5%.

Before the chancellor’s spring statement on Wednesday, the bank’s monetary policy committee (MPC) voted by eight to one to pause its cycle of rate cuts after three reductions in the past year.

Highlighting the risks from Donald Trump’s escalating trade wars and tax rises hitting the confidence of businesses and consumers, the committee said holding borrowing costs unchanged was warranted, even as the economy struggled for growth.

Andrew Bailey, the Bank’s governor, said:

“There’s a lot of economic uncertainty at the moment. We still think that interest rates are on a gradually declining path, but we’ve held them at 4.5% today.

“We’ll be looking very closely at how the global and domestic economies are evolving at our six-weekly rate-setting meetings. Whatever happens, it’s our job to make sure that inflation stays low and stable.”

Economists said the Bank had delivered a ‘hawkish’ hold, as eight of the nine policymakers voted to leave interest rates on hold. Only Swati Dhingra pushed for a quarter-point reduction to Bank rate.

The City money markets now indicate there is a roughly 50:50 split on whether the Bank cuts rates at its next meeting in May.

A rate cut is now not fully priced in until August.

In other news….

Elon Musk is being urged to refocus his attention on Tesla, and cut his work at the White House:

Norway’s sovereign wealth fund is buying a quarter of London’s Covent Garden, in a sign of confidence in the City.

The boss of the world’s biggest computer chipmaker, Nvidia, has promised that the company will shell out “several hundred billion” dollars to make semiconductors and other electronics in the US over the next four years.

The cost of government debt payments in the world’s richest nations last year reached its highest level since 2007, outstripping the amount spent on defence, police services and housing, a report has found.

Gatwick is drawing up alternative proposals to tackle congestion on roads around the airport in an attempt to keep its second runway plan alive, against planning inspectors’ advice.

The London Metal Exchange has been fined £9.2m by the City watchdog for mishandling the nickel market chaos in 2022, marking the regulator’s first penalty against a top investment exchange.

We have a little more certainty about how the EU might retaliate against Donald Trump’s trade war.

The European Union will delay implementing its first set of tariffs on goods from the U.S. until the middle of April to allow for additional time for discussions with Washington, an EU spokesperson has told CNBC.

The spokesperson explained:

“The Commission has decided to align the timing of the two sets of EU countermeasures against US 232 tariffs on EU steel and aluminum.

“The change represents a slight adjustment to the timeline and does not diminish the impact of our response, in particular as the EU continues to prepare for retaliation of up to €26bn.”

S&P Global Market Intelligence predict the Bank of England’s next interest rate cut will come in August, followed by one more in November, to get Bank Rate down to 4.0% by December.

They predict the Bank will maintain a relatively cautious assessment because of escalating upside inflation risks.

Raj Badiani, economics director for Europe at S&P Global Market Intelligence, explains:

“We continue to maintain that the foundations of medium-term price stability are not secure. Therefore, the MPC is likely to tread carefully about the timing of the next rate cuts, given the uncertainty of the main Autumn Budget 2024 measures on short-term inflation developments.

The MPC notes risks of inflation persistence and warns that monetary policy needs to remain restrictive to return inflation to its 2% target in the medium term on a sustainable basis. Today’s rate decision is disappointing news for the UK’s economy which continued to struggle in early 2025 and the risk of a mild and short-lived recession in the next few quarters is still on the table.

In addition, the economy faces another jolt with the government expected to consider additional fiscal corrective measures to protect its fiscal goals from notably weaker than expected growth developments.“ -said

Borrowers may have to wait several months for a cut to interest rates.

The City money markets now indicate that a rate cut, from 4.5% to 4.25%, is only fully priced in for August. This morning, it was pretty well fully priced in by June.

That suggests that today’s decision is being seen as hawkish – with only one policymaker, Swati Dhingra, voting for a cut today.

Ed Monk, associate director at Fidelity International, says:

“The Bank of England struck a slightly more hawkish tone in holding rates today, highlighting the need to “pay close attention” to any signs of inflation picking up again. Only one member of the MPC voted for a further cut to 4.25% this month, down from two last month.

“The bond market ahead of today’s decision was predicting rates to fall below 4% by the end of 2025, suggesting two or three more cuts this year, before levelling off through 2026. That would mean households and investors having to get used to rates settling at a meaningfully higher level than has been the case in most of the period since the financial crisis in 2008.

The Bank of England is next scheduled to set interest rates in the first week of May – and that meeting could be rather exciting.

The City is really split about what might happen, with the money markets suggesting a 54% chance of no change, and 46% for a cut.

Uncertainty is the word of the moment!

There are nine references to ‘uncertainty’ in the minutes from the Bank of England’s decision, many citing the lack of clarity over global trade policy.

“Uncertainties” – be they geopolitical, economic, or related to the UK’s fuzzy jobs data – get another eight mentions.

Bank of England agents across the country have warned that UK firms are cutting back on hiring.

The minutes of this week’s meeting explain:

The latest intelligence from the Agents suggested that employment intentions had weakened, on balance, and more firms had reported hiring pauses or freezes.

These contacts had said that they would review staffing levels through natural attrition or redundancies if the outlook did not improve.

That is likely to reinforce fears that the increase in the minimum wage, and the rise in employers’ national insurance contributions, are deterring firms from taking on staff.

Trade war uncertainty is also hurting the US economy, according to the Bank of England today.

In the minutes of the interest rate decision, the Bank predicts that US growth will slow, saying:

US GDP had increased by 0.6% in 2024 Q4, in line with the February Report projection.

Going forward, growth was expected to slow on the back of tariff and wider policy uncertainty, among other factors. Indicators of activity for 2025 Q1 suggested a weakening in household consumption growth and consumer confidence, while some surveys of firms’ output and investment expectations had also fallen in February.

Newsflash: The Bank of England has left UK interest rates on hold at 4.5%, despite concerns that trade conflict could hurt economic growth.

Faced with the dilemma of a slowing economy on one hand, and rising inflation on the other, the Bank’s policymakers have sat on their hands.

The Bank’s monetary policy committee was split, though, 8-1.

One member, Swati Dhingra, voted for a quarter-point cut to Bank rate to 4.25%.

But the other eight members voted for no change, including Catherine Mann who had surprised the City last month by voting with Dhingra for a large rate cut.

Announcing the decision, the Bank says:

As the Committee noted in February, there has been substantial progress on disinflation over the past two years, as previous external shocks have receded, and as the restrictive stance of monetary policy has curbed second-round effects and stabilised longer-term inflation expectations. That progress has allowed the MPC to withdraw gradually some degree of policy restraint, while maintaining Bank Rate in restrictive territory so as to continue to squeeze out persistent inflationary pressures.

Since the MPC’s previous meeting, global trade policy uncertainty has intensified, and the United States has made a range of tariff announcements, to which some governments have responded. Other geopolitical uncertainties have also increased and indicators of financial market volatility have risen globally. The German government has announced plans for significant reform to its fiscal rules.

Elon Musk’s boast that Tesla’s Cybertruck is “apocalypse-proof” has taken a knock, with the news today that 46,000 units are being recalled to fix a problem with exterior panels falling off.

The recall is over issues with the Cybertruck’s “cant rail” – a stainless-steel exterior trim panel - which can delaminate and detach from the vehicle.

The US National Highway Traffic Safety Administration says:

Tesla service will replace the cant rail assembly, free of charge. Owner notification letters are expected to be mailed May 19, 2025.

The combined debt pile of government and corporate borrowing has hit $100trn, the OECD thinktank has warned, as rising interest rates squeeze borrowers.

In a new report into debt, the OECD shows that sovereign and corporate bond borrowing rose to $25trillion in 2024, nearly three times as much as back in 2007 before the financial crisis.

The OECD says:

This increase is largely the legacy of the 2008 global financial crisis and the COVID-19 pandemic, in response to which large fiscal support packages, mainly funded via debt markets, helped avoid deeper recessions.

These debt piles are becoming more expensive to service, due to the increase in interest rates since the recent inflation spike.

As a result, the ratio of interest payments to GDP increased in about two-thirds of OECD countries in 2024, reaching 3.3% on aggregate, an increase of 0.3 percentage points compared to 2023.

Between 2021 and 2024, interest costs to GDP increased from the lowest to highest level in the last 20 years, the OECD warns.

Spending on interest payments is now greater than government expenditure on defence across the OECD, at a time when European governments are under pressure to boost spending on weapons.

Newsflash: The London Metal Exchange has been £9.2m over the nickel trading debacle three years ago.

The Financial Conduct Authority has ruled that the LME failed to ensure its systems and controls were adequate to deal with the severe market stress that gripped the nickel market in March 2022.

The LME was forced to suspend nickel trading for more than a week, and to controversially cancel some trades, after the nickel price doubled in a few hours.

The FCA reveals that the LME only had junior staff on duty when the nickel price began to bubble….

During LME’s ‘Asian trading’ hours, from 1am to 7am GMT, only relatively junior trading operations staff were on duty. They had not been trained to recognise anything other than error trades or rogue algorithms as potential causes of a disorderly market.

This meant that when price rises in the nickel contract became increasingly extreme during the early hours of 8 March it was not escalated to senior LME managers. Instead, trading operations staff took steps to accommodate the price rises, even disabling the price bands, during the most extreme period of volatility.

This is the FCA’s first enforcement action and fine against a “recognised investment exchange”. The LME accepted the findings, and thus won a 30% cut to the fine.

Yorkshire Water has been forced to pay out £40m to address failings over wastewater and sewage by regulator Ofwat.

The industry watchdog said a probe into the company found “serious failures” over how it operated and maintained its sewage network.

Ofwat said this resulted in excessive spills from storm overflows.

The regulator said Yorkshire Water has admitted to its failings and agreed to the enforcement package as a result.

Lynn Parker, senior director for enforcement at Ofwat, said:

“Our investigation has found serious failures in how Yorkshire Water has operated and maintained its sewage works and networks, which has resulted in excessive spills from storm overflows.

“This is a significant breach and is unacceptable.

“We are pleased that Yorkshire Water has recognised this failure and is taking steps to put it right for the benefit of customers and the environment.

“We now expect them to move at pace to correct the remaining issues our investigation has identified.”

Nicola Shaw, chief executive of Yorkshire Water, said:

“We know our storm overflows operate more frequently than we, or our customers, would like them to.

“Since 2021, we’ve been actively taking steps to improve our performance.

“We know there’s still more for us to do.

“We’re at the forefront of the industry to get this resolved and we’re looking forward to delivering our ambitious plans to improve river health in Yorkshire.

“We apologise for our past mistakes and hope this redress package goes some way to show our commitment to improving the environment.”

In the property world, Norway’s sovereign wealth fund is buying a quarter of Covent Garden.

The Norges Bank Investment Management has entered a partnership with landlord Shaftesbury, and will pay £570m for a 25% stake in the Covent Garden estate.

The estate covers 220 buildings in the heart of London’s West End.

Jayesh Patel, head of uk real estate at NBIM, says:

This investment underscores our belief in the strength of London with the portfolio complementing our other high quality West End investments.

Covent Garden is one of the world’s most recognised retail, leisure and cultural destinations and we look forward to supporting Shaftesbury Capital’s management team, with their strong track record of delivering the growth potential of this prime West End estate.”

The number of UK workers being made redundant has risen over the last quarter, to the highest in a year.

The ONS reports that 124,000 people reported they had been made redundant in November-January, or 4.2 in every thousand employees.

This is the three months immediately after Rachel Reeves’s autumn statement, in which she increased the tax take on businesses by raising the rate of employees national insurance.

This is up from 99,000 in August-October, and is the highest level since the November 2023-January 2024 quarter, when 133,000 people (or 4.6 in every thousand workers) were made redundant.

Dr Helen Gray, chief economist of Learning and Work Institute (L&W), says:

“It is worrying to see an upward trend in redundancies, coupled with the long-term decline in vacancies and rising unemployment. The potential challenge this poses to people looking for work is all the greater for those with health problems.

It remains to be seen whether the measures announced in the Government’s Pathways to Work Green Paper will be able to support the 2.8 million people who are economically inactive due to long-term health problems into work in the context of a contracting labour market.”

Today’s UK jobs report shows some small progress in tackling Britain’s economic inactivity problem.

Around 9.268m people were neither in work nor looking for a job in the November-January quarter, or 21.5% of 16 to 64 year olds.

That shows a drop of 65,000 on the previous quarter, or 169,000 fewer than a year ago.

The 9.268m people economically inactive in November-January included 2.4m students, 1.6m people looking after family or the home, 221,000 temporarily sick, 2.8m long-term sick, and around 1m retired people.

Paige Tao, economist at PwC UK, points out that the economic inactivity rate remains above pre-pandemic levels, adding:

A recent PwC report shows that rising inactivity may be set to continue, with around 12,000 more people exiting the workforce each month since late 2019.

While the government has prioritised spending on health and reducing NHS waiting times, our report suggests a preventative approach where government and employers work together to keep people engaged, healthy, and resilient in work.

Britain’s employers should provide more health support for millions of people at risk of dropping out of the workforce, the ex-high street boss leading a government review has said.

After the government announced deep cuts to sickness and disability benefits, Sir Charlie Mayfield, the former John Lewis boss, said it was clear that some companies were not doing enough to help people with health conditions to stay in a job.

Appointed late last year by the work and pensions secretary, Liz Kendall, to lead a “keep Britain working” review, he said employers had a role to play alongside the government to ensure there was enough support.

Getting employers to expand the support available for employers would not however come without a cost, he warned.

Mayfield told the Guardian:

“It’s clear there are gaps in provision in the UK. There are employers already filling those by creating their own processes. We will need to figure out how that could happen more widely including the costs and benefits of different options.”

“These are important considerations. Addressing these issues and improving how the labour market works will be valuable in all sorts of ways. Equally failing to will be damaging financially and socially. After all, higher welfare costs and lower productivity also need to be paid for.

Alongside saving billions of pounds from the welfare budget ahead of next week’s spring statement, ministers argued reforms in the benefits system were required to help tackle a rising tide of health-related economic inactivity in Britain.

In an initial report published on Thursday, Mayfield’s review found there are 8.7 million people in the UK with a work-limiting health condition, up by 2.5 million (41%) over the last decade, including 1.2 million 16-34-year-olds and 900,000 50-64-year-olds.

Official figures show economic inactivity - when working age adults are out of a job and not looking for one - has soared in recent years to about 9 million, including about 3 million people in long-term ill health.

Mayfield’s report argued employers had a role to play to prevent workers with health conditions from slipping into inactivity. However, the focus on getting industry to address the issue comes as some business leaders warn ministers they are being “milked” by the government through higher tax rises and new workers’ rights, which could force them to cut jobs, limit pay, and hold back from investment in the workforce.

Although backing the government’s welfare reforms, Mayfield’s review also said extra job support was more important. “Our strong view is that there is little evidence that those in work or those who have been in work until recently, set out with the aim of being ‘on benefits’,” it said.

ONS director of economic statistics Liz McKeown has summed up today’s UK labour market report:

“Overall pay growth remains relatively strong, with pay growth high in both the public and private sectors, despite the latter slowing slightly in the latest period.

“The wider labour market picture is relatively unchanged, with the number of employees on payroll broadly flat in the latest period and with little growth seen over much of the last year.

“Unemployment, as measured by the Labour Force Survey, and the Claimant Count have both increased slightly in the latest periods, though caution continues to be advised with the survey estimates.

“Initial estimates show that the number of vacancies is little changed on the previous quarter, remaining just above pre-pandemic levels.”

Ahead of the Bank of England interest rate announcement, we have a new healthcheck on Britain’s jobs market.

And it shows that wage growth has slowed slightly, while unemployment is a litte higher than a year ago.

The Office for National Statistics reports that total pay, including bonuses, rose by 5.8% per year in the three months to January, down from 6.1% a month ago.

Regular pay growth, which strips out bonuses, was unchanged at 5.9%.

The BoE may be relieved to see slowing pay growth, as that lessens the risk of a wage-price spiral breaking out. On the other hand, pay is still rising almost three times as fast as its inflation target.

The report also shows that the unemployment rate remained at 4.4%, with the number of people out of work and looking for a job up by 40,000 in the quarter to 1.545m

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Bank of England policymakers face a tricky situation this week when they met to set interest rates.

On the one hand, the economic picture is darkening – with UK GDP shrinking in January, the steel industry hit by US tariffs, and fears of a global trade war gripping the world economy. That’s could make the Bank consider lowering borrowing costs.

On the other hand, prices are rising faster than its target – with inflation running at 3% in January. That’s a compelling reason not to cut the cost of borrowing.

Faced with this situation, the City expects the Bank to leave policy unchanged at noon today.

The money markets indicate there’s just a 4% chance of a rate cut today, to 4.25%, and a 96% likelihood that Bank Rate is unchanged at 4.5% today.

Matthew Ryan, head of market strategy at global financial services firm Ebury, explains:

“On the one hand, the UK economy continues to trundle along at nothing more than a snail’s pace, hamstrung by acute trade uncertainties and fragile business confidence ahead of impending tax hikes.

“Yet, with most of the MPC appearing concerned about nagging upside risks to inflation, particularly stemming from sticky wage growth, we think that the hawks will get their way, with the communications to hint at only a gradual pace of cuts ahead.

The BoE last cut rates in February, when we were surprised that the previously hawkish. BoE policymaker Catherine Mann voted for a jumb reduction in rates.

There could be a similar split today, Ryan suggest:

The vote on rates appears highly unlikely to be unanimous, and we expect the two members that opted for a jumbo rate reduction last time out, Dhingra and Mann, to favour a 25bp cut on Thursday.

The decision comes at noon – before that, the Swiss and Norwegian central banks will make their interest rate announcements too, on a busy week for central bankers.

Last night, officials at the US Federal Reserve cut their US economic growth forecasts and raised projections for price growth as they kept interest rates on hold.

“Uncertainty around the economic outlook has increased,” the central bank said in a statement, as Donald Trump’s attempt to overhaul the global economy with sweeping tariffs sparks concern over inflation and growth.

The agenda

• 7am GMT: ONS releases latest UK labour market report

• 8.30am GMT: Swiss National Bank sets interest rates

• 8.30am GMT: Sweden’s Riksbank sets interest rates

• 10am GMT: Eurozone construction output report for January

• Noon: Bank of England rates decision

• 12.30pm: US weekly initial jobless claims data

• 12.30pm: Philly Fed business conditions index

• 2pm US existing home sales for February