Interest rates and the stairway

Inflated expectations

The charts showing the UK's 14 consecutive interest rate rises are perfectly like the silhouette of a set of stairs and now we've reached the landing. Or at least a corner step.

The Bank of England's Monetary Policy Committee voted five to four in favour of putting interest rates on hold on Thursday. Four members of the MPC voted to raise rates to 5.5 per cent.

It is the first time the Bank of England has taken a break from increasing rates since November 2021.

More jagged and bumpy is the trajectory of inflation, the object of this rising ladder of economic pain.

Figures on Wednesday morning showed a small drop in prices, but not enough to avoid more political and financial pain for the UK.

The rate of inflation fell to 6.7 per cent in August, despite an increase in the price of petrol, according to the Office for National Statistics (ONS).

It was widely expected that inflation in the month, which follows a reading of 6.8 per cent in July, would rise on higher oil prices.

British Prime Minister Rishi Sunak has set a simple goal for his inflation policy: to drop by half from its peak of 11.1 per cent. That looks awfully like 5.5 per cent to me but with just a few months of the year left any new shift higher would not be good.

It's not just headline figures that cloud the horizon for the Conservatives' hopes to retain office. The British debt is index-linked to a degree not seen in many countries. That means more spending on repayments.

The totemic triple lock on pensions will push up expenditure by more than expected next year. Those and other factors mean a pre-election tax cut or two is a receding prospect.

All in all Downing Street is not out of the woods. The most recent forecast on Tuesday from the rich world's OECD had more bad news for Mr Sunak. It expects average UK inflation of 7.2 per cent for 2023, not much of an improvement from the average of 9.1 per cent over 2022.

Inflation across the G20 is expected to be 6 per cent for 2023, with the UK posting the fastest price rises in the G7 and the third-fastest across the broader group, which includes Turkey, India, South Africa and Russia.

French visits from the English king and Rome's pope

It's a banner week for French visitors with Paris welcoming King Charles and Pope Francis due in Marseille for the first papal visit there in 500 years.

Go back those five centuries and the notorious English King Henry VIII was invading France as part of the papal war of succession.

King Charles is on a rescheduled visit to France, where he hopes to recreate the success of a trip to Germany earlier in the year.

With Britain and France grappling over the fallout from Brexit and the challenges of the migrants crossing the English Channel, the UK will be hoping his visit will help to smooth ties that have been tested in recent years.

UK fiddles, Sudan burns

Global Britain was a slogan that promised more, not less, engagement with the world. But a cut in UK aid commitments had a devastating effect on the country's ability to play a role as conflict and crisis swept the Mena region.

That's the view of top parliamentarians who have been scathing about the UK's withdrawal from areas of high instability, including Libya, Sudan and Tunisia.

Programmes aimed at stabilising conflict areas in the Middle East and North Africa have been halted altogether while others have had budgets cut in half.

The first year of those cuts in 2022 saw the Conflict, Stability and Security Fund’s budget slashed by ￡401 million to ￡858 million – a reduction of 32 per cent.

“These cuts may have impaired the government’s ability to respond effectively to recent crises in the Middle East and Sudan,” the National Security Strategy Committee said.