Liz Truss warns there is ‘a reckoning coming’ for central banks, and backs Trump in battle with Fed – business live

The financial markets aren’t convinced that the Bank of England will be able to cut interest rate again this year.

After five quarter-point cuts since last summer, the Bank may struggle to agree a sixth until 2026.

Shane O’Neill, head of interest rates at Validus Risk Management, explains:

As this clip shows, Liz Truss fears the UK is further down the “negative spiral” created by slow growth and the shortfall between tax revenues and spending:

Liz Truss also told Bloomberg that she is even more convinced that the UK is at risk of a 1970s-style economic crisis than a year ago, when she warned of the risk of a bailout.

Today, though, the bond market is calm.

UK government borrowing costs are unchanged today, with the yield (or interest rate) on 30-year British debt pretty-much flat at 5.594%.

Earlier this week it hit 5.63%, close to the 27-year high (5.663%) reached in April.

Professor Costas Milas, of the Management School at the University of Liverpool, is very troubled by Liz truss’s comments about central banks and the conduct of monetary policy.

Prof Milas tells us:

Clearly, Trump wants to take full control of US monetary policy and is not shy of saying so. Is it the case of Liz Truss advocating a similar scenario for the UK?

More worryingly, Liz Truss needs to explain how to go about that. In the US, Trump is forcing Fed Governor Lisa Cook out of the Fed with a series of unproved (so far) accusations, at the same time while giving a “signal” that he will follow similar tactics with the remaining Fed Governors.

Is former PM Liz Truss advocating a similar strategy to be pursued by Sir Keir Starmer, or something else in order to bring monetary policy back in the hands of the UK government?

2h ago05.45 EDT

Zero farmers would vote Labour again after inheritance tax row, poll finds

Helena Horton

Keir Starmer enjoyed a boost from the rural community during the 2024 general election after he and environment secretary Steve Reed went on tour of the farming conferences and other countryside events to assure those in attendance that they understood their struggles.

But now, that support has evaporated, according to farmers polled by the Country Land and Business Association (CLA).

This is due to fury over the inheritance tax on agricultural assets brought in at last year’s budget, which is projected to put some farms out of business when they are passed on.

A survey of 490 farmers and landowners by the rural business group puts Reform UK (36%) just behind the Conservatives (38%) in farmer support, with Labour attracting 0%.

“The Treasury says these reforms will barely touch rural Britain,” CLA president Victoria Vyvyan said, adding:

“Our polling shows they will force hard choices on farms that have sustained communities for generations – selling land, laying off workers, shelving future plans.

“Rural Labour MPs can see what’s coming. They know it will drain the life from the countryside and strip away the trust of the people who sent them to Westminster.

“If they support it, their voters won’t forget.”

Supporters of central bank independence argue that it has played an important role in recent decades in subduing inflation, and persuading investors that governments wouldn’t inflate their debts away.

Finland’s central bank chief Olli Rehn (who we heard from earlier) has made this point this morning.

Rehn told a panel discussion on democracy held in Turku, Finland:

“If the central bank’s independence were truly to crumble, and the U.S. Federal Reserve began making decisions on grounds other than sound monetary policy principles — for example, because the president demands lower interest rates — the inevitable consequence would be inflation picking up.”

Liz Truss’s comments show how Trump’s efforts to roll back the decades-old consensus on the value of independent monetary policy has “an eager audience in some of the world’s largest economies”, point out Bloomberg.

They add:

In the UK, officials for the populist Reform UK, which has led public opinion polls for months, have suggested they might be willing to rein in some of the BOE’s powers. And Reform’s leader, Nigel Farage — a long-time Trump supporter — has privately discussed the possibility of taking back independence from the central bank, Bloomberg reported in June, citing people familiar with the discussions.

With UK food inflation now hitting 4.2%, we would like to hear from people on how they feel about food inflation and if it’s affected their shopping habits….

Former UK prime minister Liz Truss is backing Donald Trump in his fight with the Federal Reserve.

Truss has told Bloomberg’s Odd Lots podcast that it is wrong that unelected central bankers can undermine (as she sees it) elected politicians.

Truss, who was briefly prime minister in September and October 2022, said:

“I think the Bank of England needs to be accountable to politicians. I think the current system doesn’t work. This is why I’m very sympathetic to what Donald Trump is saying about the Fed.”

In the interview, Truss explains that people who owned assets and capital had done very well from the easy money created by the Bank of England (BoE) since the financial crisis, while that loose policy also made it hard for young people to buy homes.

Given the importance of monetary policy of setting the allocation of assets within society, she argues that it’s wrong that people who make those decisions aren’t accountable to the electorate.

She says:

“It’s also very difficult, as I found as prime minister, to combine fiscal and monetary policy if you don’t hold one of the levers. So, I think it’s got to change.

I think there is a reckoning coming for the central banks, not just in Britain but also in the United States, also the ECB.

The current system does not work.

Truss, who lost power after her mini-budget spooked the financial markets, crashing the pound and driving up borrowing costs, also claimed the BoE had “sabotaged” what she tried to do because she had been a critic of central banks, and wanted the Treasury to have a larger role setting the Bank’s mandate.

“They didn’t like their power being challenged.”

Truss has previously blamed the Bank of England for failing to anticipate the market consequences of her budget. Governor Andrew Bailey has rejected that criticism, pointing out that the Bank used its intervention tools to stabilise the bond market and protect pension funds.

In her Bloomberg interview, Truss argues that democratically elected leaders shouldn’t “cowtow”, criticises the “failing economic orthodoxy” and warns that Britain is heading for a “very, very serious crisis.”

Truss, who lost her parliamentary seat in last year’s general election, says the UK now faces an “economic doom loop of higher taxes, lower growth, higher debt, and it’s very difficult now to see the political way out of that.”

Finland’s central bank chief has warned that President Donald Trump’s attacks on the US. Federal Reserve have a significant impact on the financial markets and the world economy.

Olli Rehn warned in a speech this morning that the Fed’s independence has remained an inviolable principle since the 1980s, but was now under attack, Reuters reports.

Rehn explained:

“Now, however, this principle is wobbling badly. This could have substantial, global knock-on effects on both the financial markets and the real economy.”

Rehn’s comments follow Donald Trump’s attempt to fire Federal Reserve governor Lisa Cook over unconfirmed allegations of mortgage fraud; Cook is refusing to step down, and pledging to sue the Trump administration.

Trump has also repeatedly criticised the Fed, and its chair Jerome Powell, for not cutting US interest rates.