Closing post
Time to recap.
The Bank of England have predicted last month’s budget will have a downward impact on inflation.
BoE deputy governor Clare Lombardelli told the Treasury Commitee that Rachel Reeves’s fiscal measures could knock up to half a percentage point off inflation next year, broadly inline with forecasts from the Office for Budget Responsibility.
The Bank also poured cold water on claims that uncertainty, and the flurry of news stories, in the run-up to the budget had caused market instability. Bank staff have calculated there was less volatility than normal.
But policymakers did also tell MPs that there was a “detrimental impact” on consumer confidence and investment, as people waited to learn what was in the budget.
Elsewhere…
Donald Trump’s decision to allow Nvidia to export its H200 artificial intelligence chip to China has been criticised as a “colossal economic and national security failure” by Democrat senators…
…although it’s been welcomed by Nvidia!
The EU has opened an investigation to assess whether Google is breaching European competition rules in its use of online content from publishers and YouTube creators for artificial intelligence.
The boss of Ford has said western carmakers are “in a fight for our lives” against Chinese competition as the US manufacturer agreed a new partnership with France’s Renault.
The online card service Moonpig has reported a bump in sales thanks in part to its increased use of AI to help design cards, personalise customers’ messages and answer queries.
MPC's Dhingra:commodity price shocks are behind UK's inflation surges
The Treasury committee hearing wraps up with an explanation of the drivers behind the UK’s episodes of high inflation.
BoE policymaker Swati Dhingra explains she has looked at the impact of Brexit, the first Trump trade wars, and other times when inflation pressures rose.
And, she says, the “ones that really really matter when it comes to our inflation target is still commodity price shocks.”
Dhingra adds:
If you go back to the 1960s, the times when the UK saw high inflation episodes is precisely the times when there have been big global commodity shocks.
Bank of England deputy governor Clare Lombardelli also told MPs she is more concerned about the supply side of the labour market than demand for new workers.
Lombardelli tells the Treasury Committee there has been quite a large increase in youth unemployment, and also says the UK appears to have a unique problem with the impact of ill health on economic inactivity levels.
Although Dave Ramsden tried to swerve this issue, there was clearly a jump in UK borrowing costs on 14 November – the first day of trading after news broke that Rachel Reeves was not going to raise income tax.
That rise in 10-year bond yields reflected City worries that the chancellor might not expand her fiscal headroom as much as hoped.
But on 26th November, yields fell back after Rachel Reeves revealed she had more than doubled her headroom (to achieve a balanced budget).
Monetary Policy Committee member Swati Dhingra then tells MPs that overall, the impact of the budget on inflation is not large but it is “in the right direction”.
Mann: Budget uncertainty was detrimental to confidence and investment
BoE policymaker Catherine Mann is more critical about the build-up to the budget.
She tells the Treasury committee that the range of policy uncertainty, and the long period of time it dragged on for before the budget on 26 November, damaged the economy.
Mann explains:
I would make the point that the duration of uncertainty with regard to the budget and, I would argue, the policy prevarications and policy uncertainty, was detrimental to consumer confidence and to business investment.
We heard this from our agents. We can see it happening in research.
Updated
Bank of England: Budget could knock 0.5 percentage points off inflation
The Bank of England has estimated that Rachel Reeves’ budget last month will knock off around 0.4 to 0.5 percentage points from the annual rate of inflation, starting from around the second quarter of 2026.
Deputy governor Clare Lombardelli has told the Treasury Committee during today’s hearing that Bank staff have analysed the budget, and believe it will have a “mechanical effect” pushing inflation down. She cites:
The changes in energy prices, fuel duty, a bit less from electric vehicles and rail. So, you know, that will just shift inflation.
[That could help get inflation down to the Bank’s 2% target].
The impact of the budget on growth will be smaller, though, Lombardelli adds, explaining:
There is obviously a slightly looser fiscal policy, a bit more government spending, so that would push up on GDP in the short term. The effects are quite small.
Updated
Q: Bloomberg reported that gilts “plunged” at the start of bond trading on Friday 14th November, following the report in the Financial Times that the rise in income tax had been shelved. There was then a Treasury briefing that this was due to an improvement in the forecasts – so was the gilt market trading fairly that morning?
Deputy governor Dave Ramsden says there was “volatility", and a pick-up in bond yields (which rise when prices fall).
But he suggests it wasn’t particularly unusual – and not as worrying as after Donald Trump’s “Liberation Day” tariff announcements in April, when volatility turned into te risk of being disorderly.
Q: But is it fair that some market participants were getting more information than others?
Ramsden won’t comment or speculate on this.
Labour MP Luke Murphy then tries to get Sir Dave Ramsden to comment on the action in the gilt market since the budget, with little success.
“I don’t think it’s our job to give a running commentary unless there’s really something significant that might prompt us to have to intervene, which obviously we haven’t had to do for several years” Ramsden says, swaying away from giving a verdict (while also reminding MPs about the chaos of the 2022 mini-budget).
But more generally, he points out that the yield (interest rate) on UK 10-year bonds today is basically the same as at the start of the year, while other country’s bond yields have risen by more (such as Germany).
BoE's Ramsden: UK bond market was less volatile ahead of the budget than usual
Bank of England deputy governor Sir Dave Ramsden has dismissed claims that the uncertainty ahead of last month’s budget caused unusual volatility in the government debt market.
Ramsden has told the Treasury committee that there were moves in the UK debt markets in the run-up to the budget, due to both domestic and global factors.
He says BoE staff analysed if the movements in gilts in the three months up to the budget were any more volatile than in the rest of 2025, or in the run-up to previous budgets.
That work showed that the “10 day rolling average of the difference between the high and low yield on each day”. That volatility was actually lower than ahead of other fiscal events in recent years, Ramsden says, adding:
Volatility is a fact of life in the markets at the moment.
Q: What about the gilt moves on 4th November, when the chancellor gave her scene-setting speech (hinting at income tax rises) and 14th November (when news of a u-turn broke)?
Ramsden says:
It would be impossible to completely account for moves on any day. The moves on the 14th were reasonably large, but you’ve got to see that in the context of more general volatility.
Deputy governor Clare Lombardelli reminds MPs that there is always a lot of speculation and uncertainty in the run-up to a budget.
But she adds that Bank staff, and its agents around the country, saw that people were unsure what would be in the budget, and that had an impact on investment. But there is now certainty, as the budget has been delivered, Lombardelli adds.
Bank of England policymakers explain interest rate vote split
Bank of England policymakers have shown MPs why they were split 5-4 in their vote to leave interest rates on hold in November.
Deputy governor Dave Ramsden, one of the minority of four policymakers who voted to cut rates last month, said he placed weight on the Bank’s central projection, and also cites concerns that the labour market may be weakening.
Ramsden tells the Treasury committee:
I see the risks around the central projection for inflation returning to target at the start of 2027 as pretty balanced, but for me…I think the downside risks of inflation coming in below target over that horizon were more apparent compared to where they were in August.
Ramsden isn’t ruling out the wories about inflation persistence, though.
But external policymaker Catherine Mann – who voted to hold interest rates -says her key view is ‘inflation persistence’, and explains that the last few years of high inflation have led to ‘behavioural changes’.
She says:
They [those behavioural changes] come through firms being reluctant to reduce prices, even when sales are weak. We have household and business expectations rising, as opposed to falling, even as inflation itself falls.
It is “without doubt” that the private sector jobs market has weakened, Mann adds.
The dovish Swati Dhingra (who voted to cut) tells MPs that the disinflation process has been on track this year, although an “inflation hump” has been created by rising food prices and “administered prices” [ie, price increases for goods and services set by governments or firms].
On food inflation, she says:
But what’s happening in food price inflation is it’s basically ten items that are driving our divergence from the euro area. And those ten items are clearly not things that we grow. Chocolate is one of the primary ones.
[Reminder, we learned this morning that chocolate prices are up 18% in the last year!]
And finally, deputy governor Clare Lombardelli (who voted to hold rates) sums up the mood of the committee last month:
All of us are balancing risks….different people put different weights on those upside and downside risks.
Lombardelli adds that she worries more about the upside risk to inflation, but is also concerned about economic activity levels.
She also reveals she is “less convinced than others about how restrictive monetary policy is at the moment and how far we are from reaching the end of the cutting cycle”.
Updated
Bank of England testifying to Treasury committee
Senior members of the Bank of England are appearing before the Treasury committee now.
MPs will hear from deputy governors Clare Lombardelli and Sir Dave Ramsden, as well as two external members of the Monetary Policy Committee – Swati Dhingra and Catherine Mann.
The quartet are without governor Andrew Bailey, who isn’t available due to “an unavoidable international commitment”.
They will discuss the Bank’s decision to maintain interest rates at 4% in November, and also its latest Monetary Policy Report.
Protests against closure of Lloyds' Penzance branch
Campaigners and small businesses from Cornwall have made the trek to London today, to protest against Lloyds Banking Group’s closure of its Penzance branch this coming January.
It comes amid a major digital push from Lloyds, which is trying to push more customers to online banking services and ultimately cut down on more expensive bricks and mortar branches.
However, locals are frustrated that this will leave just one Lloyds branch to serve the entire county by the end of 2026, in Truro.
Sue Calvert, director of Alfred Smith and Son - a furniture retailer which has banked with Lloyds for over 100 years - told the Guardian that protesters ended up meeting with James Harrison, Director of Personal Banking as they handed over more than 3,000 signatures this morning in an effort to save their local branch.
She says:
“His reasoning for closing the Penzance Branch is that 71% of their customers from this branch are using the Lloyds Banking App. What about the other 29%?”
Calvert warned that her business will be forced to change banks unless the decision is reversed.
“Unfortunately if Lloyds does go ahead with their closure we will with a heavy heart have to move banks following over 100 years with Lloyds and five generations of using Market House, Penzance.
Further to the protest we would also like to draw attention to all rural communities that are ‘being ‘debanked’’ by the withdrawal of vital financial services. Lloyds are closing a further 40 branches in the next 10 months.”
The money markets are still expecting the Bank of England to lower UK interest rates next week.
A quarter-point cut, from 4% to 3.75%, is seen as a 86% chance, with at least one more cut expected by the end of next year.
But looking across the world’s central banks, investors are less confident that we will see cuts to borrowing costs.
Money markets are now pricing in almost no prospect of further interest-rate cuts from the European Central Bank, and around a 30% chance of a hike by the end of 2026. In Australia, central bank Governor Michele Bullock on Tuesday ruled out further easing to leave swaps implying almost two quarter-point increases by the end of next year.
And traders are all but certain the Bank of Japan will raise its benchmark rate 25 basis points next week to 0.75%, with at least one more increase expected next year.
Microsoft is continuing to battle today’s problems with Copilot, and is now tweaking its load balancing and capacity settings…
It says:
We’ve identified a separate issue affecting load balancing, which is also contributing to the overall impact. We’re making changes to our load balancing rules to provide relief. In parallel, we’re continuing to work on increasing capacity to meet demand. For more information, please see CP1193544 in the admin center.
Employees of Dutch intelligence services have reportedly been named by China, according to a newspaper report in the Netherlands, raising further questions over continuing repercussions from the Dutch government’s intervention in Chinese owned chip maker Nexperia at the end of September.
Names of personnel in the intelligence service, AIVD, and its military equivalent, MIVD, are said to have been published in a Chinese language news website in Hungary, where Beijing has an “all weather strategic partnership” which has delivered investments in battery and car industries.
It is known that tensions continue between Nexperia in Nijmegan and its owner Wingtech in China with Dutch managers making a public plea 10 days ago for its parent firm to communicate with them.
The standoff comes weeks after it appeared the dispute between Wingtech and the Netherlands had been resolved with Beijing lifting the ban on global exports of Nexperia chips.
The Chinese website, which reported in English and Chinese, referred to an alleged visit by a Taiwanese delegation to Amsterdam earlier this year and a return visit by Dutch to Taipei. According to the Chinese website, the Dutch services were trying to get help from the Taiwanese to recruit leading Chinese experts in chips.
Sense Hofstede, a China expert, told de Volkskrant, that naming the intelligence personnel was “unusual”.
The Military Intelligence Bureau (MIB) in Taiwan denied online reports, branding it disinformation by the Chinese Communist Party aimed at undermining Taipei.
They said a post uploaded on 29 November to a Hungarian-based website, the Europe Wanshida Web, was “distorted” and “inconsistent with what actually happened,” without elaborating.
The Dutch military intelligence service has not commented.
Trump may make tariff changes to lower some prices
Donald Trump has indicated that he could take steps to reduce some of the rise in food costs caused by his tariffs.
In an interview with Politico’s Dasha Burns, Trump indicates he could extend the carveouts announced last month.
Here’s a portion of the interview transcript:
Burns: Would you consider more carveouts on other goods that Americans find too expensive?
Trump: Well, some carveouts, you mean from tariffs?
Burns: From tariffs, yeah.
Trump: Yeah. Yeah.
Burns: Like coffee, like bananas.
Trump: Yeah. Sure. And I’ve done that already ...
In November, the US president moved to lower tariffs on food imports, including beef, tomatoes, coffee and bananas, in an executive order. That unwound some of the impact of the higher costs caused by Trump’s tariffs on America’s trading partners.
Sentiment among US small businesses increased last month, thanks to a jump in optimism about the sales outlook.
The National Federation of Independent Business’s optimism index rose by 0.8 points to a three-month high of 99.. Six of the 10 components that make up the gauge increased, while three decreased. One was unchanged.
NFIB also reported a 9-point improvement in sales expectations, with a net 15% of owners anticipate higher sales volumes in the next three months. That’s the largest share since the start of the year.
Microsoft say they’ve identified an issue impacting “service autoscaling to meet demand” for Copilot.
They add:
We’re manually scaling capacity to improve service availability, and we’re monitoring this closely to ensure the expected outcome is achieved. For more information, please see CP1193544 in the admin center.
Microsoft: Users in UK and Europe may have problems accessing Copilot
Microsoft has warned that users in the UK and across Europe may be unable to access its AI assistant, Copilot, today.
The software giant is investigating, and says:
Upon an initial investigation, we’ve identified this issue may impact any user within the United Kingdom, or Europe, attempting to access Microsoft Copilot. Indications from service monitoring telemetry suggest an unexpected increase in traffic has resulted in impact. We’re continuing to investigate further to determine the next steps required.
Website Downdetector shows a surge of reported problems with Copilot in the last two hours:
I just checked Copilot online, though – it seems to be working OK, and tells me:
Here’s the latest: Microsoft has acknowledged a Copilot outage affecting UK users and is posting live updates through its official Microsoft 365 Status channels. The issue is tracked under incident code CP1193544, and Microsoft engineers are investigating backend infrastructure errors while monitoring diagnostic logs
After a couple of choppy sessions, UK government bonds are strengthening today.
With prices rising, the yield (or interest rate) on 10 and 30-year gilts has dropped.
Ten-year gilt yields are down 3 basis points to 4.511%, while 30-year yields are 4bps lower at 5.196%.
Mark Dowding of Asset management firm RBC BlueBay, says:
As unpopular as she may be, [chancellor Rachel] Reeves’s survival for the time being is largely seen as a good thing by the gilt market.
Reflecting on these developments, RBC Bluebay has moved to a modest overweight position in gilts, though the firm continues to remain positioned short in the pound, based on the view that the UK’s growth prospects will continue to be depressed, and this should lead to monetary easing as an offset.
Teresa Ribera, the EC’s executive vice-president for Clean, Just and Competitive Transition, has explained why the Commission is probing Google over its artificial intelligence activities:
“AI is bringing remarkable innovation and many benefits for people and businesses across Europe, but this progress cannot come at the expense of the principles at the heart of our societies,”
“This is why we are investigating whether Google may have imposed unfair terms and conditions on publishers and content creators, while placing rival AI models developers at a disadvantage, in breach of EU competition rules.”
Elsewhere in the markets, shares in Danish wind-energy developer Orsted have hit a four-month high after a US federal judge ruled President Donald Trump’s executive order banning new wind projects was illegal.
Judge Patti Saris of the U.S. District Court for the District of Massachusetts ruled that Trump’s effort to halt virtually all leasing of wind farms on federal lands and waters was “arbitrary and capricious” and violates U.S. law.
Analysts at RBC Europe Ltd. said in a note that the ruling “should put to rest any remaining uncertainty for developers with projects currently under construction in the US.”
In the City, shares in British American Tobacco have dropped by 3.5% this morning after it predicted its revenue and profits this year will come in at the lower end of its mid-term targets.
BAT told shareholders that its vape sales in the US continue to be hit by “illicit proliferation” – the rise of sales of illegal vaping devices, often with sugary flavors designed to attract young people.
It believs its Vuse division is “well positioned to benefit from stronger Federal and State level enforcement”.
Overall, CEO Tadeu Marroco says BAT remains on track to hits its full-year goals, and announced the company will increase its buy-back programme to £1.3bn for 2026.
Investors, though, have made BAT the top faller on the FTSE 100 so far this morning.
EU launches antitrust probe into Google's use of online content for AI purposes
Newsflash: The European Commission has opened an antitrust probe into whether Google is breaching EU competition rules by using online content from web publishers and its YouTube service for artificial intelligence purposes.
The EC says:
The investigation will notably examine whether Google is distorting competition by imposing unfair terms and conditions on publishers and content creators, or by granting itself privileged access to such content, thereby placing developers of rival AI models at a disadvantage.
The Commission is concerned that Google has used web publishers’ content without permission or compensation, both to create AI-powered services and to train its AI models.
It explains:
The content of web publishers to provide generative AI-powered services (‘AI Overviews’ and ‘AI Mode’) on its search results pages without appropriate compensation to publishers and without offering them the possibility to refuse such use of their content. AI Overviews shows AI-generated summaries responsive to a user’s search query above organic results, while AI Mode is a search tab similar to a chatbot answering users’ queries in a conversational style. The Commission will investigate to what extent the generation of AI Overviews and AI Mode by Google is based on web publishers’ content without appropriate compensation for that, and without the possibility for publishers to refuse without losing access to Google Search. Indeed, many publishers depend on Google Search for user traffic, and they do not want to risk losing access to it.
Video and other content uploaded on YouTube to train Google’s generative AI models without appropriate compensation to creators and without offering them the possibility to refuse such use of their content. Content creators uploading videos on YouTube have an obligation to grant Google permission to use their data for different purposes, including for training generative AI models. Google does not remunerate YouTube content creators for their content, nor does allow them to upload their content on YouTube without allowing Google to use such data. At the same time, rival developers of AI models are barred by YouTube policies from using YouTube content to train their own AI models.
The Commission will now carry out its in-depth investigation into whether Google has breached EU competition rules.
Updated
Chocolate prices up 18.4% (!) in last year
Chocolate prices are up a painful 18.4% on this time last year, Worldpanel by Numerator’s grocery inflation report shows.
That follows a sharp rise in cocoa prices this year, following poor harvests in Africa, which has prompted some biscuit makers to put less chocolate into their products.
UK grocery inflation sticks at 4.7%
UK grocery price inflation has held steady at 4.7% in November, as supermarkets offer discounts to lure shoppers into their stores.
Data provider Worldpanel by Numerator has reported that 31.2% of spending was on promoted items in November, up from 30% this time last year.
Fraser McKevitt, Head of Retail and Consumer Insight at Worldpanel Division, says:
Retailers are pulling out all the stops to win shoppers over as they gear up for one of the most important trading periods of the year.
One in five households tell us that they’ve been struggling financially and that’s been largely consistent over the past two years.
With the cost of living still biting for many this Christmas, just under one third of all spending is on promotion as supermarkets find ways to shield shoppers from the impact of price rises.
China’s tech stocks have slipped slightly following Trump’s announcement last night.
China’s SSE Star Chip index dropped by 1% at the start of trading, before recovering slightly to a 0.43% fall.
China’s CSI semiconductor industry index had a similar drop, before recovering to a 0.36% fall.
Nvidia: We applaud President Trump’s decision
Trump’s decision follows months of lobbying by Nvidia’s CEO Jensen Huang, so it’s unsurprising that the company has welcomed it.
“We applaud President Trump’s decision,” said a Nvidia spokesperson. He added that offering the H200 chips “to approved commercial customers, vetted by the Department of Commerce, strikes a thoughtful balance that is great for America”.
Nvidia’s H200 chips are the company’s second-most powerful. They’re far more advanced than the H20, which was originally designed as a lower-powered model for the Chinese market, but which was banned from sale to China by the US in April.
Last night, Donald Trump insisted that Nvidia’s most powerful AI chips wouldn’t be sold to China, posting:
Nvidia’s U.S. Customers are already moving forward with their incredible, highly advanced Blackwell chips, and soon, Rubin, neither of which are part of this deal.
My Administration will always put America FIRST. The Department of Commerce is finalizing the details, and the same approach will apply to AMD, Intel, and other GREAT American Companies. MAKE AMERICA GREAT AGAIN!
Introduction: Trump clears way for Nvidia to sell powerful AI chips to China
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Donald Trump has been accused of a “colossal economic and national security failure” for allowing Nvidia to export its H200 artificial intelligence chip to China.
The US president announced last night he has granted Nvidia permission to ship H200 chips to China in exchange for a 25% surcharge for the US, a move that could allow the world’s most valuable company to win back billions of dollars in lost business.
Trump posted on his Truth Social site:
“I have informed President Xi, of China, that the United States will allow NVIDIA to ship its H200 products to approved customers in China, and other Countries, under conditions that allow for continued strong National Security.
President Xi responded positively!”
The news lifted Nvidia’s shares by 2.3% in after hours trading on Wall Steet.
But it was swiftly criticised by some senior Democratic senators, including Jeanne Shaheen and Chris Coons — the top two Democrats on the Senate foreign relations committee — Jack Reed, the Democratic head of the Senate armed services committee, and Elizabeth Warren, the Ranking Member of the Senate Banking Committee.
They, and other Democratic senators, urged Trump to reverse the decision saying:
“The Trump administration’s announcement that it will allow the export of advanced H200 AI chips to China is a colossal economic and national security failure. The H200s are vastly more capable than anything China can make and gifting them to Beijing would squander America’s primary advantage in the AI race.
“Access to these chips would give China’s military transformational technology to make its weapons more lethal, carry out more effective cyberattacks against American businesses and critical infrastructure, and strengthen their economic and manufacturing sector. Chinese AI giant DeepSeek said as recently as last week that the lack of access to advanced American-designed AI chips is the single biggest impediment to its ability to compete with U.S. AI companies. With this decision, President Trump is poised to remove that barrier.
“Senate Democrats and Republicans both know that the 21st century will be defined by whether the leading AI systems are built on values of free societies and free markets or the repressive, authoritarian values of the Chinese Communist Party. The Trump administration clearly doesn’t grasp the urgency of this contest. President Trump must reverse course and recommit to preserving American dominance in AI.”
In October Nvidia CEO Jensen Huang said his company has gone from having 95% of the Chinese market to having 0%, and called bans on its sales to China a “strategic mistake”.
Selling H200 chips to China – the world’s second-largest economy – could mean a windfall worth billions of dollars for Nvidia, which is already valued at $4.5tn.
The agenda
8am GMT: UK grocery inflation report
2.15pm GMT: Treasury Committee hearing with Members of the Bank of England’s Monetary Policy Committee
3pm GMT: House of Lords Economic Affairs Committee hearing: “Does the OBR play an effective role?”
