ALEX BRUMMER: Every rise in dollar makes fight against inflation harder

Should we be surprised that UK retail sales plunged in August? Not at all. Despite record temperatures, national dialogue has been dominated by energy and the apocalyptic choices consumers will have to make between food and freezing – as if Britain were a country without a safety net for prosperity.

The reality is that the old Tory regime, in two packages, pumped £37bn into the economy to alleviate the hardships long before Labor and various think tanks started creating a merry hell.

The result is shaky consumer confidence and declining retail sales.

The reign of Liz Truss was barely out of the starting blocks when Queen Elizabeth II’s glorious life ended.

But it’s worth noting that what has been described by some as the most ideological free-market government of modern times began its life with a large-scale intervention.

It is doubtful whether the cost of £100bn plus the cap on domestic energy bills to £2,500 over the next two winters is the biggest measure of recent times.

Covid-19 aid, including furlough, cost £300 billion at its peak. And Gordon Brown went big during the banking crisis, with a £500bn bailout.

No individual or company can ignore the predictions of a horrific rise in the energy price ceiling.

But the idea that nothing would be done was misleading and has only thwarted a weak recovery.

The new enemy in the block is rising interest rates.

The World Bank fears that the arms race to raise borrowing costs, curb inflation, increase recession risk.

Western countries will struggle, but the pain for emerging markets and developing countries will be greater.

Sri Lanka may have been the first to face riots in the streets, but it is unlikely to be the last.

Financial markets are dominated by the prospect of another 0.75 percentage point rise in major US federal funds next week, as Federal Reserve Chairman Jay Powell tries to erase his mistake by delaying the fight against inflation.

The result is another dollar gains in foreign exchange markets, with the dollar aligning this week with a full 1 percent gain against the currencies of its major trading partners.

The euro and Japanese yen have taken a hard hit, but the pound is the biggest casualty, dropping to a 37-year low of $1,1351 yesterday on the 30th anniversary of Black Wednesday.

That was the day then-Chancellor Norman Lamont revealed that his wife had “heard him sing in the bath.”

The dollar’s rebound is reaching a level where it could become a cause for the G7. In modern times, it has posted 20 percent annualized gains against the currencies of its main competitors only four times.

They were in 1992 when the pound sterling was thrown out of the exchange rate mechanism (the predecessor to the euro); at the turn of the millennium when a newly minted euro tumbled; in the wake of the great financial crisis of 2008; and when the oil price collapsed in 2015. This week, the Bank of Japan indicated that enough was enough. It’s hard to imagine Bank of England governor Andrew Bailey not having collywobbles either.

Each rise in the dollar makes the fight against inflation more difficult.

Wrong job

There was a huge sigh of relief from US satellite company Viasat after the Department for Business, Environment & Industrial Strategy (BEIS) ruled that the £6bn bid for UK satellite pioneer Inmarsat will not be examined under National Security. and Investment Act .

Despite the economic commitments Viasat has made so far to maintain a UK headquarters, research and development and support for space education, the deal is not yet final.

It still has to overcome high hurdles often raised by the Competition and Markets Authority and EU regulators.

Whitehall’s first major decision since Jacob Rees-Mogg took the helm at BEIS favors free markets and inward investment over preserving UK’s proprietary satellite communications and tracking technology.

That doesn’t bode well for the future of the UK’s depleted technology and engineering sector.