Top central bankers to speak
Over in Sintra, Portugal, some of the world’s top central bankers are about to discuss monetary policy and the state of the global economy.
The central bank chiefs of the UK, the eurozone, the US, Japan and Korea are all appearing on a panel organised by the European Central Bank, at its Forum on Central Banking 2025.
The session is titled:
Adapting to change, macroeconomic shifts and policy responses.
On the panel, we have:
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Andrew Bailey, Governor, Bank of England
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Christine Lagarde, President, European Central Bank
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Jerome Powell, Chair, Board of Governors of the Federal Reserve System
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Chang Yong Rhee, Governor, Bank of Korea
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Kazuo Ueda, Governor, Bank of Japan
Key events
Fed chair Jerome Powell blames Trump tariffs for failure to cut US interest rates this year
The top US central banker has indicated that Donald Trump’s trade war has prevented the cuts to interest rates which the president has been demanding.
Jerome Powell, who has been repeatedly criticised by Trump for the Federal Reserve’s failure to cut interest rates this year, has told an audience in Portugal that uncertainty over the impact of Trump’s tariffs prevented the Fed from cutting rates.
Powell explains that the US economy is “healthy” and in a good position, with inflation down to 2.3%, core inflation is at 2.7%, and an unemployment rate is 4.2%.
Powell explains that “if you ignore tariffs”, inflation is behaving as the Fed expected and hoped.
He says:
We haven’t seen effects much from tariffs, and we didn’t expect to by now. We’ve always said the timing, amount and persistence of the inflation would be highly uncertain and it’s certainly proved that.
We’re watching. We expect to see over the summer some higher readings, but we’re prepared to learn that it can be higher, or lower, or later or sooner than we’d expected.
Q: Would the Fed have cut more by now if it wasn’t for the tariffs?
Powell replies that “I think that’s right”, before explaining that the Fed is waiting until it knows the impact of the Trump trade war.
He explains:
In effect we went on hold when we saw the size of the tariffs.
Essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs. We didn’t overreact, in fact we didn’t react at all, We’re simply taking some time.
Powell concludes by explaining that “the prudent thing to do” is to wait and see the impact of imposing tariffs on US imports, given the US economy is “in solid shape”.
Trump has repeatedly accused Powell of being ‘too late’ to cutting rates, pointing out that other major central banks have lowered rates more quickly. The Fed hasn’t cut rates since last December.
On Monday, Trump produced a hand-written note showing how US interest rates are much higher than many other countries.
Trump wrote that the Fed “should be ashamed of themselves for allowing this to happen to the United States”, and claimed they had “cost the USA a fortune” by not lowering borrowing costs.
Lagarde: Not saying ‘mission accomplished’ after inflation hits target
The session in Sintra begins with Christine Lagarde welcoming this morning’s news that eurozone inflation rose to 2% in June, from 1.9% in May.
Lagarde reminds her audience that 2% inflation, in the medium term, is the European Central Bank’s target.
I am not saying ‘mission accomplished’, but I say ‘target reached’, OK.
The ECB president then warns that “we are facing a lot of uncertainty”, including the risks of fragmentation, and worrying geopolitical developments that are causing a ‘two-sided risk to inflation’.
We have to continue to be extremely vigilant, and remain committed to delivering on the inflation target, Lagarde says, insisting:
We are well-equipped to navigate the tormented waters that we should anticipate.
EU-US trade talks could result in four options
Lisa O’Carroll
EU member states have been advised there could be four options emanating from this week crunch talks between trade commissioner Maroš Šefčovič and US trade representative Jamieson Greer over tariffs.
One option is no deal but another more likely scenario of the three remaining is a deal in which both signs are aligned “in broad brush strokes” but centre, like the UK’s deal, on a limited number of sectors such as cars and steel.
This would leave the threat of future tariffs on other sectors open, risking new crises emerging without warning during the remainder of the Trump term.
A third option is a delay, extending talks beyond 9 July. This carries the risk of Donald Trump’s threatened 50% unilateral tariffs being imposed on all imports from the EU from 10 July.
And a fourth option is an “imbalanced deal”, the type that would favour the US, something Emmanuel Macron last week said he would not accept.
Details of the negotiations were not shared in the 45 minute briefing given by Ursula von der Leyen’s head of cabinet Bjoern Siebart and Sabine Weyand, director general of the trade commission, best known in the UK as Michel Barnier’s right hand woman during Brexit negotiations.
EU ambassadors gave also been warned that the 10% blanket tariff may remain but that if they cannot secure a reduction then they will try and extract duty free exemptions in some sectors.
A delegation headed by trade adviser Thomas Baert flew to Washington on Monday for technical talks with Šefčovič joining them tomorrow for talks with trade representative Jamieson Greer.
He is likely to return to brief member states on Thursday with a possible further of ambassadors meeting on Friday ahead of next week’s deadline.
UK outlines timeline for workers’ rights package
Heather Stewart
The UK government has just published the timetable for the implementation of its big workers’ rights package, which UK employers will have to get their heads around in the coming months. Some business groups had been lobbying for a longer implementation period, but Labour is keen to press ahead.
A new Fair Work Agency, to enforce the rules, will be up and running next year, ministers said.
Some changes – such as the repeal of the Tories’ strike-busting minimum service levels legislation, will come into force as soon as the Employment Rights bill gets Royal Assent, expected to be later in the summer.
Next April (2026) will mark the end of the two-day wait for statutory sick pay, and stronger protection for whistleblowers; new regulations to set up a fair pay agreement for the social care sector will follow next October.
Another slew of changes are expected to come into force in 2027, including new rights to bereavement leave, and day one rights to unfair dismissal. Deputy prime minister Angela Rayner said:
“these landmark reforms will kick in within months, demonstrating our commitment to making work pay for millions of workers across the country and delivering real change.”
Top central bankers to speak
Over in Sintra, Portugal, some of the world’s top central bankers are about to discuss monetary policy and the state of the global economy.
The central bank chiefs of the UK, the eurozone, the US, Japan and Korea are all appearing on a panel organised by the European Central Bank, at its Forum on Central Banking 2025.
The session is titled:
Adapting to change, macroeconomic shifts and policy responses.
On the panel, we have:
-
Andrew Bailey, Governor, Bank of England
-
Christine Lagarde, President, European Central Bank
-
Jerome Powell, Chair, Board of Governors of the Federal Reserve System
-
Chang Yong Rhee, Governor, Bank of Korea
-
Kazuo Ueda, Governor, Bank of Japan
Elon Musk and Donald Trump are continuing to trade barbs.
Trump has told reporters at the White House that he would look into deporting Musk, when asked about the billionaire’s vocal criticism of Trump’s tax and spending legislation.
Trump then repeated his threat to unleash the Department of Government Efficency on Musk’s empire, saying:
“We might have to put DOGE on Elon. DOGE is the monster that might have to go back and eat Elon. Wouldn’t that be terrible?”
🚨Donald Trump says he will “take a look” at deporting Elon Musk from the US:
“We might have to put DOGE on Elon. You know what DOGE is? The monster that might have to go back and eat Elon”pic.twitter.com/XaLIWNmi6c
— Republicans against Trump (@RpsAgainstTrump) July 1, 2025
In response, Musk has posted enigmatically…
So tempting to escalate this. So, so tempting. But I will refrain for now.
So tempting to escalate this. So, so tempting. But I will refrain for now.
— Elon Musk (@elonmusk) July 1, 2025
The row is continuing to hurt Tesla’s shares, they’re now down over 6% in pre-market trading.
Speaking of trade deals… US Treasury Secretary Scott Bessent has said America is hopeful China will do more to ease the export of rare earth magnets after last month’s deal between the two countries.
Bessent told Fox News that flows had still not returned to levels seen in early April, despite the agreement which the two sides hammered out in London last month.
Bessent said:
“We are hoping that they will flow at a faster rate.
“Rare earth magnets are flowing. They are not flowing as they did before April 4, but we are confident that the Chinese will live up to their side of the deal.”
Here’s Susannah Streeter, head of money and markets at Hargreaves Lansdown, on M&S’s recovery from its cyber-attack:
“Marks and Spencer is halfway there, but there’s still a lot to get back online before the company can put the cyber attack behind it. 50% of online operations are back up and running, but its popular click and collect services remain suspended. At the company’s AGM, CEO Stuart Machin put the latest timeline on a recovery at four weeks. This should mean the retailer will hit August firing on all cylinders once again. Management have previously estimated that it could cost as much as £300 million in lost sales and operational disruption, although it’s likely that this will be mitigated by insurance claims and cost efficiencies made elsewhere. While services have been suspended the company is believed to have used the opportunity to speed up part of its digital transformation plan, as well as ensuring that its IT systems are robust enough to withstand a future attack.
“There will be high hopes that M&S can put this unfortunate chapter behind it, and the early signs are that there is pent up demand, particularly for its summer styles, with many of the popular products sold out online. Its strong set of annual results showed the retailer was in a resilient position before the cyber attackers infiltrated systems. Sales growth in the fashion and home & beauty division reflected improved customer perceptions of value, quality, and style. Demand for M&S food remains robust, with increased volumes driving growth. So, with the underlying performance remaining solid, it bodes well for M&S ahead, but until everything’s back up and running, it’s likely to weigh on investor sentiment. Although shares have been in positive territory today, they remain around 13% lower than the level in mid-April, before the cyber attack took hold.’’
EU close to trade deal with US
Lisa O’Carroll
European trade commissioner Maroš Šefčovič will travel to Washington tomorrow hoping to strike a tariff agreement in principle with Donald Trump’s team, my colleague Lisa O’Carroll reports from Brussels.
He will meet trade representative Jamieson Greer with hopes rising they will have enough in the coming days to agree the basics ahead of 4 July Independence Day negotiations.
At the same time they recognise the volatility on the US side and are working to avert any further threats of tariffs that Trump may like to announce to extract more concessions from the EU. He recently warned tariffs on pharma were coming “very soon”.
If an agreement in principle is struck, talks would then continue, possibly beyond 9 July to work out the detail.
This would follow the pattern in the UK which took more than a month to get to a final text.
Yesterday Šefčovič revealed it was a good time get down to “drafting” an agreement and “drafts of proposals for the eventual agreement in principle”, a significant change of language which suggests they close to settling differences on major issues.
EU sources confirm the European Commission is now putting all its efforts into a “quick deal” rather than hold out for a deep and wide one covering up to 1,000 product lines.
This follows criticism by German chancellor Friedrich Merz last week that the EU was too complicated.
Germany’s priority is get the 27.5% tariffs reduced or eliminated on car exports and the same for steel exports which are facing 25% tariffs.
The Baltic states, in particular, area also keen to build on the humouring of Donald Trump at last week’s NATO summit and want to ensure everything is done to keep him on board with weapons supply in Ukraine.
Sources say the EU is more or less resigned to a 10% blanket tariff on exports to the US remaining and may offer more imports on semi-conductors to sweeten the deal.
However there remain worries that Trump could yet announce tariff on pharma exports as part of his negotiation tactics to extract more from the EU.
An EU technical delegation flew to Washington on Monday, ahead of Šefčovič ’s visit with expected meetings with commerce secretary Howard Lutnick, who looks after sectoral deals, and with Greer.
With the clock ticking down towards Trump’s self-imposed deadline for a deal of 9 July, there is still plenty of room for a change of mood in the Oval Office.
Overnight Trump expressed frustration over Japan trade negotiations on Monday with treasury secretary Scott Bessent warning that countries could be notified of sharply higher tariffs as a July 9 deadline approaches despite good-faith negotiations.
Speaking on Monday in Brussels, Šefčovič said
“The 9th of July is around the corner. So for me, it’s always a good sign when we kind of move from, I would say, exchange of views, into the drafting process.”
“As you know, we received first drafts of proposals for the for the eventual agreement in principle we are working on that,” he told reporters in Brussels.
He added the EU was pushing for a deal that “was fair for both sides”.
M&S hopeful cyberattack impact will be mostly behind it by August
UK retailer Marks & Spencer is optimistic that the worst of its recent cyber attack will be behind it by August.
M&S’s chief executive Stuart Machin told shareholders at the retailer’s annual general meeting today that the company
Machin explained that the half of M&S’s online store which is not yet open – including its click and collect service – will be fully restored within the next four weeks, and other systems which are currently being rebuilt will be operating by August.
He told shareholders:
“I have previously highlighted that it would take all of June and all of July, maybe into August but definitely by July.
“During the incident we chose to shut things down because we didn’t want the risk of things going wrong.
“Currently, half of online is open but not areas like click and collect. Within the next four weeks we are hoping for the whole of online to be fully on.
“Then our focus will be getting the Donington site back and running. We’re hoping that by August we will have the vast majority of this behind us and people can see the true M&S.”
Last month Marks & Spencer reopened its website to shoppers, six weeks after it was forced to halt online orders after the cyber-attack.
Tesla shares slide as Trump threatens to set Doge on Musk
Shares in Tesla are set to fall when Wall Street opens, after relation between CEO Elon Musk and US president Donald Trump deteriorated.
Tesla’s shares are down 4.5% in pre-market trading.
Over the weekend, Musk claimed that Trump’s tax and spending bill was “utterly insane and destructive,” claiming the latest draft of the bill would destroy millions of jobs in America and cause immense strategic harm.
Musk also claimed:
“It gives handouts to industries of the past while severely damaging industries of the future.”
Musk later vowed to unseat lawmakers who support the budget bill:
Trump has now hit back, threatening to clamp down on the government subsidies received by Musk’s businesses using The Department of Government Efficiency department which the billionaire used to helm.
Trump posted on his Truth Social site:
Elon Musk knew, long before he so strongly Endorsed me for President, that I was strongly against the EV Mandate. It is ridiculous, and was always a major part of my campaign. Electric cars are fine, but not everyone should be forced to own one.
Elon may get more subsidy than any human being in history, by far, and without subsidies, Elon would probably have to close up shop and head back home to South Africa. No more Rocket launches, Satellites, or Electric Car Production, and our Country would save a FORTUNE.
Perhaps we should have DOGE take a good, hard, look at this? BIG MONEY TO BE SAVED!!!
The London has moved gingerly into the second half of the year.
The FTSE 100 index of blue-chip shares has dropped by 17 points, or 0.2%, to 8743 points. Mining stocks are leading the risers, reflecting optimism that the US may agree more trade deals soon.
But housing stocks, and banks, are among the fallers following this morning’s news that UK house prices fell by 0.8% in June.
Eurozone inflation rises: What the experts say
The small pick-up in eurozone inflation last month makes it likely the ECB will leave interest rates on hold at its meeting later this month.
Richard Flax, chief investment officer at Moneyfarm, says policymakers will be worried that energy prices could pick up again.
Eurozone inflation rose slightly from 1.9% in May to 2.0% YoY in June, aligning with the ECB’s target. The increase was driven by higher energy costs and persistent service sector inflation, which continues to be the main source of upward pressure. Core inflation is expected to remain unchanged, suggesting that underlying price dynamics are stable for now.
Energy markets remain a key risk. Prices surged in June due to geopolitical tensions, though a recent ceasefire in the Middle East has helped ease some of the pressure. Still, the potential for renewed volatility could complicate the inflation outlook in the months ahead.
With inflation near target and no major surprises in core data, the ECB is expected to hold rates steady at its July meeting. Markets are looking to September for the next potential move, depending on how inflation evolves.
Diego Iscaro, head of European economics at S&P Global Market Intelligence, also sees a September cut as more likely:
“Inflation edged upwards in June, just as markets expected. The modest increase in inflation is not particularly worrying, given it was mainly driven by a lower fall in energy prices, but the somewhat stronger rise in service price inflation will not be welcome news.
“We do not think June’s inflation print will give ammunition to either doves or hawks on the ECB’s governing council. With trade policy-related uncertainty still clouding the picture, there is a risk that the economic outlook may look quite different when the ECB meets later this month.
We still expect interest rates to remain unchanged this month, but we see the door opening for a last 25bp cut in September as subdued activity and a stronger euro push underlying inflationary pressures down.”
Eurozone inflation rises to ECB target
Newsflash: Inflation across the eurozone has risen back to target.
Consumer price across the euro area rose by 2.0% in the year to June, statistics body Eurostat reports, up from 1.9% in May.
That means inflation is back to the European Central Bank’s 2% target.
The increase was partly due to changes in energy prices. Energy inflation rose to -2.7% in June, up from -3.6% in May, following the increase in oil prices last month driven by the crisis in the Middle East.
Service sector inflation rose to 3.3%, up from 3.2%, while food, alcohol & tobacco inflatoin dipped to 3.1%, fromh 3.2% in May. Goods inflation slowed to 0.5%, from 0.6% in May.
During his interview with CNBC, Andrew Bailey also warned that UK companies are delaying investments due to economic uncertainty.
He says:
“That increase in uncertainty and predictability is definitely coming through in terms of activity and growth.
“When I go around the country talking to businesses, which I do a lot, what they tell me is that they are putting off investment decisions.”
UK factory downturn easing
The downturn in UK manufacturing has eased last month, new data shows, as output, new orders and employment fell at slower rates than in May.
The latest survey of purchasing managers at British factories has also found that business optimism improved to a four-month high in June.
This lifted the UK manufacturing PMI to 47.7 in June, its highest reading in five months, but still below the 50-point level separating expansion from contraction.
The report found that manufacturers cut output due to weak market conditions, lower demand from clients, trade war uncertainty and geopolitical tensions.
Tariffs continued to hit demand, and client confidence, with new export business falling for the forty-first month in a row amid reports of reduced demand from the US, Europe and China, S&P Global says.
Manufacturers also cut jobs, for the eighth month running, with the steepest reductions at large-scale producers, despite the UK securing its trade deal with the US last month.
Rob Dobson, director at S&P Global Market Intelligence, says:
“Although the downturn in UK manufacturing continued in June, the latest PMI survey provides signs of conditions stabilising. Production, new orders and employment all fell at slower rates, while business optimism picked up to a four-month high. The orders-to-inventory ratio, a reliable bellwether of future production trends, also climbed sharply to its highest since August 2024.
Inflation of both input costs and selling prices meanwhile nudged lower to hint at a softening inflation trend.
“That said, any hoped for stabilisation remains fragile and subject to potential headwinds that could severely impact demand, supply chain reliability and future growth prospects, as manufacturers continue to caution their optimism with concerns about heightened geopolitical tensions, weak global markets, tariff uncertainties and fears over the direction of future government policy.”