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JamesSmithRF @jamessmithrf.bsky.social · 30/09/2026

BBC are reporting this morning that energy bills are set to jump 16% in January. On its own, obv not good news (as Jonny makes clear below - more support is likely coming at the Budget), but this is actually lower than 24% BoE has a couple of weeks ago as wholesale gas prices have fallen slightly.

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JamesSmithRF @jamessmithrf.bsky.social · 24/09/2026

Finally, it’s all things AI related here at the NIESR #LMPF2026. Great panel including Kanishka Narayan and @dianecoyle1859.bsky.social and chaired by Jonathan Haskel. Mostly focused on growth potential rather than the end of humanity. Mostly…

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JamesSmithRF @jamessmithrf.bsky.social · 24/09/2026

Next up is the simple topic of QT and the public finances(!) here with my previous BoE colleague Paul Fisher in full flow. Key issue here is the role QT is playing in making it harder to hit 2% inflation AND bring borrowing down.

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JamesSmithRF @jamessmithrf.bsky.social · 24/09/2026

At the @NIESRorg London Macro Policy Forum we’re talking about the monetary policy outlook. Great panel with @swatidhingra.bsky.social, Jan Vlieghe and others. Clear theme: how BoE deals with the gathering energy price shock. Difficult times ahead…

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JamesSmithRF @jamessmithrf.bsky.social · 22/09/2026

Here's full details of this morning's disappointing public finances data from @cillian-sheehan.bsky.social. The data show higher spending than the OBR had bee forecasting, at least a big chunk of which is the effects of higher inflation.

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

Finally, this still looks like a difficult Budget in the offing. And it is not clear that today fall in gilt yields will count towards headroom estimates (the OBR keep its market window secret). Repairing the public finances much be a priority here. More on that here with @ruthcurtice.bsky.social:

resolutionfoundation.substack.com

Crowd-pleasing cost of living measures risk being self-defeating

Borrowing, inflation, and the case for targeted help

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

So theres good news for the Chancellor today in the form of falling yields off the back of the sensible DMO announcement on unwinding QE. BUT the need for support for families struggling with energy bills looks urgent. Support must be targeted. Heres how: www.resolutionfoundation.org/publications...

resolutionfoundation.org

Billing me softly • Resolution Foundation

Less than a month after Britain’s new Prime Minister took office, and despite a day one decision to cut VAT from electricity bills, yet another escalation in the war in Iran means that energy bills ha...

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

As well as sounding a warning over prospects for rising food inflation, the BoE said it now expects a 24% rise in energy bill in January. This will take the price cap to ~£2,130 and will be above levels when large-scale support has previously been forthcoming.

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

So the Bank Rate decision and the announcement on QE unwind are both good news for the cost of borrowing. But today's announcement came with a stark warning from the BoE on the cost of living...

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

There are still risks here. Active gilt sales will continue at ~£20bn a year and this is likely to still put upward pressure on already high gilt yields. This makes it harder for the govt to bring down borrowing AND tightens financial conditions, making it hard for BoE to deliver 2% inflation.

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

Despite a faster unwind, gilt yields have fallen. So what is going on? Here the BoE also announced will ask the Debt Management Office to manage the sales - retiring long-dated gilts that aren't in demand and selling new bonds instead. This is a sensible move and explains why yields have fallen.

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

In a surprise move the BoE has said it will now unwind all but £120bn of those gilts by 2034, selling about £20bn a year, but also allowing £220bn to mature. This provides welcome certainty on plans here but it suggests a faster pace of unwind than markets had expected (see red line below).

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

Instead, the big news today was on how the BoE unwinds the assets it holds after its QE program. This matters because it is selling UK govt debt (or gilts), raising the cost of borrowing for the government and pushing up interest rates throughout the economy.

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

This is the right call: oil prices have been volatile and with UK wage growth subdued + the lab market loose, there's little sign yet that energy inflation is spilling over into generalised inflation. This will be a relief for mortgagors already suffering with higher rates.

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

Market expectations have shifted for rate rises have shifted A LOT since July as oil prices have returned to over $100pb. So there was a sense that we *might* get a rate rise today - but in the end the BoE was on hold at 3.75% rate we've been at all this year.

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JamesSmithRF @jamessmithrf.bsky.social · 17/09/2026

BoE did not follow the Fed and ECB today, leaving rates on hold at 3.75%. But the big news was on how it unwinds QE, allowing the Debt Management Office to manage the process. Both of these are good news on the cost of borrowing but there was also bad news on the cost of living...

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

Thanks so much to @cillian-sheehan.bsky.social for help with this thread. 👏

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

The balancing act for the Chancellor is to find ways to support families through the difficult winter ahead while also prioritising keeping borrowing falling and ensuring credibility-building levels of fiscal buffers. This means *targeted* support (see: resolutionfoundation.org/publications...).

resolutionfoundation.org

Billing me softly • Resolution Foundation

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

Finally, there was bad news for the Chancellor as rising inflation puts more upward pressure on borrowing costs which have reached new post-financial-crisis highs. This will make a difficult first Budget even harder at the end of October.

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

There was also bad news for the BoE as inflation now looks decisively higher than its July forecast. It is nailed on that rates won't rise tomorrow...BUT there is a big question about whether the Bank can continue to wait if inflation rises further.

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

Overall, then, the August inflation print is a worrying one - particularly given the outlook for rising inflation. There was bad for families already struggling with the high cost of essentials with more to come in the next few months...

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

There was little news on *underlying* inflation today - for example, both services inflation and core inflation was unchanged. But progress here has been faster than expected in recent months. The big question is whether this will last if headline inflation rises further...

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

There was some good news on food prices where inflation remained at a near 5-year low of 1.3%, confounding expectations from the BoE of a rise. With oil prices rising and worries about harvests at home and abroad, it's not clear how long this can last though.

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

Even more worryingly, this chart shows we were already expecting bills to rise to nearly £1,900 in January, but current pricing suggests that cd now be over £2,000. That wd take us back to levels where Liz Truss provided expensive blanket support.

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

In August, petrol rose by 9.1p per litre to £1.61; diesel was up 14.2p to £1.82. With Brent crude pushing $110pb, petrol prices have been rising *since* August. So with prices currently around £1.70 and £1.90 for petrol and diesel, there is more of this to come...

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

The story this month is very simple with the rise almost entirely driven by the rising price of motor fuels. Changes in other categories were generally small.

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JamesSmithRF @jamessmithrf.bsky.social · 16/09/2026

CPI inflation jumps back up to 3.1% in August from 2.9% in July. This was in line with market expectations but above the BoE forecast (from July). The worse news is that with rising oil and gas prices there is more of this to come... Short thread to follow.

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JamesSmithRF @jamessmithrf.bsky.social · 08/09/2026

Want to know how the net zero transition can be leveraged to drive new high-quality jobs and regenerate local areas? Course you do. @zackleather.resolutionfoundation.org has the answers for you here...

resolutionfoundation.substack.com

Is net zero reindustrialising the North?

Green jobs, clean industries, and the future of Grimsby and Aberdeen

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

And higher rates would also be bad news for the Chancellor heading into his first Budget already worried about the high cost of servicing government debt. So, overall, not much to cheer about in this morning's inflation release for households, mortgagors or the Government.

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

Higher than expected inflation for the BoE is - at the margin - bad news for mortgagors as it raises the chance of a rise. Inflation is expected to pick up to over 3% in the coming months (particularly when the price cap rises again in Oct), which increases pressure on policymakers

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

So today's inflation release contains bad news for families struggling with the high cost of living. This chart just reminds you that July's increase in energy prices comes on top of huge rise since 2021 in energy bills and other essentials.

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

The other piece of goodish news was on underlying inflation where services inflation eased from 3.6% in June to 3.4%. This was in line with BoE expectations.

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

There was some good news on food prices which were unchanged on the month with food price inflation again lower than expected by the BoE. But food price inflation is expected to rise again in the coming months reflecting higher energy prices. Risk here is that bad European harvests push prices up.

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

Offsetting that, the other key piece of news was a fall in petrol prices of 3.1p/l in July and diesel which was down 8.8p/l. But this will be short lived as petrol prices are higher in August reflecting the flare up in tensions in the Middle East. More volatility to come here...

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

The higher Ofgem price cap pushed CPI up by ~0.4ppts. ONS report bills rose nearly 15% on the month as the price cap reflected the impact of war in the Middle East for the first time. In new money, the price cap is £1,663 for Jul-Sep and is expected to rise again in Oct to around £1,700).

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JamesSmithRF @jamessmithrf.bsky.social · 19/08/2026

Summer of good economic news seems to be grinding to a halt with UK inflation up to 2.9% in July, from 2.6% in June, slightly higher than expected by the BoE. Main driver was a rise in energy prices reflecting the impact of conflict in the Middle East. Short thread to follow..

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JamesSmithRF @jamessmithrf.bsky.social · 18/08/2026

All you need to know about this morning's mixed bag of labour market data from @hannahslaughter.bsky.social and @louisemurphy.bsky.social here:

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

For now BoE is caught between the risk of high inflation and signs that inflationary pressures are easing. So no change decision is not a surprise. How those two balance out will be key for interest rates - BUT will also be key for how much room for manoeuvre the new government has.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

All this is bad news for families struggling with the cost of living. But it is also bad news for the new government who will be hoping for an end to war in the Middle East, lower energy prices and lower rates.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

So key message from the BoE is that IF energy prices remain high *and esp IF that leads to another round of sticky inflation*, we are staring down the barrel of weaker growth, a worse cost of living crisis, higher unemployment and ultimately higher rates.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

Even under the central case growth is stodgy and inflation is picking up. All that is worse if energy prices remain elevated and inflationary pressures pick up. This is a call to action for the new Chancellor.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

But the flipside here is that inflationary pressures seem to be falling. This chart shows wage growth has been easing and is now below levels consistent with the inflation target. But the key risk is that pressure here pick up again as workers fight against falls in real wages.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

One piece of good news for families on the cost of living has been weaker than expected food price inflation. The BoE today said that it doesn't expect that to last. 😭

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

(As an aside we estimate that based on recent high yields and unfunded spending the gov't's headroom is down to ~£8bn)

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

Sticky inflation is bad news for families (longer cost of living crisis) but it is also bad news for Andy Burnham as it has contributed to the high cost of borrowing for the UK govt and is a big part of the constraints the govt is under.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

This is a big risk in the context of high inflation UK has had since the start of the cost of living crisis compared to other countries.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

To help with this, BoE is using upside and downside scenarios around its central projection. In the upside scenario energy prices are higher and inflation is stickier and inflation stays above target for longer.

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JamesSmithRF @jamessmithrf.bsky.social · 30/07/2026

Key context for today's decision is a renewed rise in energy prices following the increase in tensions in the Middle East. So BoE is balancing risk of high energy inflation against further signs of disinflation. This is HARD.

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