Economy

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U.K. inflation rose to 2.6% in November, the Office for National Statistics said Wednesday, in line with the forecast of economists polled by Reuters.
Core inflation, excluding energy, food, alcohol and tobacco, came in at 3.5%, just under a Reuters forecast of 3.6%.
“This upwards trajectory looks set to continue over the next few months,” Joe Nellis, economic adviser at accountancy MHA, said in emailed comments on Wednesday, citing the energy market and “the long-term pressure of a tight domestic labor market.”

The columns of Royal Exchange are dressed for Christmas, at Bank in the City of London, the capital’s financial district, on 20th November 2024, in London, England.
Richard Baker | In Pictures | Getty Images

LONDON — U.K. inflation rose to 2.6% in November, the Office for National Statistics said Wednesday, marking the second straight monthly increase in the headline figure.
The reading was in line with the forecast of economists polled by Reuters, and climbed from 2.3% in October.

Core inflation, excluding energy, food, alcohol and tobacco, came in at 3.5%, just under a Reuters forecast of 3.6%.
Headline price rises hit a three-and-a-half year low of 1.7% in September, but was expected to tick higher in the following months, partly due to an increase in the regulator-set energy price cap this winter.
“This upwards trajectory looks set to continue over the next few months,” Joe Nellis, economic adviser at accountancy MHA, said in emailed comments on Wednesday, citing the energy market and “the long-term pressure of a tight domestic labor market.”
Nellis added that these structural issues would be “exacerbated by recent decisions made by the Government,” including higher public sector pay settlements, an increase to the minimum wage and pressure on businesses caused by a hike in tax contributions for employers.
Persistent inflation in the services sector, the dominant part of the U.K. economy, has led money markets to price in almost no chance of an interest rate cut during the Bank of England’s final meeting of the year on Thursday. Those bets were solidified earlier this week when the ONS reported that regular wage growth strengthened to 5.2% over the August-October period, up from 4.9% over July-September.

The November data showed services inflation was unchanged at 5%.
Research group Capital Economics said the print “firmly rules out” a BOE December rate cut.
However, the overall inflation figures were broadly in-line with BOE projections, George Dibb, associate director for economic policy at the Institute For Public Policy Research (IPPR), said by email.
“The real concern is the U.K.’s weaker-than-expected growth, now lagging behind the Bank’s own projections,” Dibb said.
The U.K. economy unexpectedly contracted by 0.1% in October, in the second consecutive monthly downturn.
The British pound continued to trade 0.06% lower against the U.S. dollar and 0.19% lower against the euro following the release of the print.
If the BOE leaves monetary policy unchanged in December, it will finish out the year with just two cuts of its key rate, bringing it from 5.25% to 4.75%. The European Central Bank has meanwhile enacted four quarter-percentage-point cuts and this month signaled a firm intention to move lower next year.
The U.S. Federal Reserve is widely expected to trim rates by a quarter point at its own meeting on Wednesday, taking total cuts of the year to a full percentage point. Some skepticism lingers over whether it should take this step, given inflationary pressures. More

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Facing a tough election next year, the centre-left Labor government said the economy had slowed under the weight of high interest rates and elevated inflation, but insisted public spending would help ensure a soft landing.Recent data for the third quarter showed that without public investment in infrastructure and rebates on electricity costs, the economy would have been in recession.In its Mid-Year Economic and Fiscal Outlook (MYEFO), the government still had to trim its forecast for economic growth in the current fiscal year to end June 2025 to 1.75%, down from 2.0% in its main Budget last May.Wage growth was also marked down to 3.0% in a blow to government claims it would deliver faster pay gains than the Liberal National opposition.The economic slowdown was enough for the Reserve Bank of Australia (RBA) last week to open the door to policy easing, having held interest rates at 4.35% for all of this year.Treasurer Jim Chalmers on Wednesday suggested more cost of living relief could be on the way, on top of the tax cuts, electricity rebates, cheaper medicines and other policies the government has already delivered to date. “From budget to budget, if we can afford to do more and there is a case to do more to help people with the cost of living, of course then we will consider that,” Chalmers said in a press briefing. All this government spending meant its budget was back in deficit after two years of rare surpluses, though the shortfall this year was not as large as first feared.The Treasury projected a deficit of A$26.9 billion ($17.04 billion) for the current 2024/25 year. That compared with a forecast of A$28.3 billion in its main Budget last May.From there, the red ink only gets worse due to A$25 billion in extra payments. The projected deficit for the three years to 2027/28 is now A$117 billion, or A$23 billion more than expected in May.”The slippage in subsequent years is largely because of urgent, unavoidable or automatic increases in spending in areas like pensions, Medicare and medicines,” Treasury said in a statement.Expected tax revenues from companies have also been downgraded as subdued demand in China weighs on prices for some of Australia’s main commodity exports, notably iron ore. It retained the long-term iron ore price assumption at $60 per tonne by the third quarter 2025, compared with $104 per tonne currently. The government’s net debt was now seen expanding to A$1.16 trillion by 2027/28, from an expected A$940 billion this year. At 36.7% of gross domestic product, net debt would still be low by international standards.Estimated overseas migration has been revised up to 340,000 for the 2024/25, from 260,000, as the government struggled to bring migration to more sustainable levels. ($1 = 1.5783 Australian dollars) More

TOKYO (Reuters) – The U.S. dollar held steady against the yen and other major rivals on Wednesday as investors waited to see whether the Federal Reserve will deliver a hawkish cut before the Bank of Japan and other central banks meet this week.The Fed is widely expected to deliver a 25-basis-point interest rate cut at the end of its two-day policy meeting on Wednesday, with markets pricing in a 97% probability, according to the CME’s FedWatch tool.Focus will fall on policymakers’ new economic projections for the upcoming year released alongside the decision, namely how much further Fed officials think they will reduce rates in 2025.Given the string of robust inflation and activity data, the Fed may signal a slower pace going ahead, revising projections to indicate three cuts in 2025 instead of the current four, Tony Sycamore, market analyst at IG, wrote in a note to clients.”If the median dot were to show just two cuts, this may be considered more hawkish, (although) it would align with current pricing in the rates market,” he said.Data on Tuesday showed a resilient U.S. economy after retail sales beat expectations by jumping 0.7% in November, backed by an uptick in motor vehicle and online purchases.Investors are also weighing the possible impact of promised tariffs and tax cuts by the incoming Trump administration on the Fed’s outlook. The U.S. dollar index, which measures the greenback against six rivals, was little changed, down 0.04% at 106.89 after hitting its highest since Nov. 26 at 107.18 on Monday.Against the yen, the dollar was up 0.12% at 153.65, having given up some of its recent gains in the previous session as U.S. Treasury yields dipped ahead of the Fed’s decision. [US/]Markets have significantly reduced bets the Bank of Japan (BOJ) will raise rates on Thursday in favour of a January hike following a slew of media reports indicating the bank may take a cautious stance.Japan’s exports rose for a second straight month in November, data showed on Wednesday.The Bank of England is also expected to hold rates steady on Thursday. Investors further reined in bets on cuts next year after data on Tuesday showed British wage growth picked up more than expected. Sterling was nearly flat at $1.27095 ahead of CPI figures for November scheduled for release later in the day.The euro sat at $1.0502, up 0.09%.Among other central banks meeting this week, Sweden’s Riksbank is seen cutting rates by as much as half a point, while the Norges Bank will likely leave rates unchanged.The Swedish crown held at 10.9469. The Norwegian krone hovered around 11.1793 against the greenback.Elsewhere, the offshore yuan traded at 7.2885 per dollar, not far from a 13-month low touched against the dollar on Tuesday amid dour expectations for Chinese economic growth.The Australian dollar, which tends to act as a liquid proxy for the yuan, dipped 0.17% to $0.6326 against the greenback, its lowest since November 2023.The kiwi fetched $0.57565, up 0.04%.In cryptocurrencies, Bitcoin fell 0.54% to $105,836.57 after hitting a high of $108,379.28 in the previous session. More

Kioxia, a major manufacturer of memory chips, raised 120 billion yen after pricing its IPO in the middle of the indicative range at 1,455 yen per share. On Wednesday, it rose as high as 1,504 yen before trading at 1,485. Kioxia, formerly known as Toshiba (OTC:TOSYY) Memory, was bought for 2 trillion yen in 2018 by a Bain-led consortium from Toshiba after a long and contentious battle. Toshiba put the business up for sale after plunging into crisis due to cost overruns at its nuclear business.The road to the IPO has been an arduous one for Kioxia, whose name is a combination of the Japanese word kioku meaning “memory” and the Greek word axia meaning “value.”The deal by the Bain consortium to acquire Kioxia, seen as a prized asset at the time, was a landmark intervention by private equity in Japan. Uncertainty has continued since the sale, with Bain postponing IPO plans two years later amid uncertainty in the global chip market stemming from U.S-China tensions.An effort to merge Kioxia with partner Western Digital (NASDAQ:WDC), which had initially objected to the sale to the consortium, stalled due to objections from the Japanese company’s investor SK Hynix. Bain Capital scrapped plans for an IPO of Kioxia in October after investors pushed the buyout firm to almost halve the 1.5 trillion yen valuation it was seeking, Reuters has reported.($1 = 153.6800 yen) More