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Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.<\/strong><\/p>\n President Donald Trump\u2019s<\/strong> new tariffs have come into effect today at a rate of 10%, after the US supreme court blocked many of his import taxes on Friday.<\/p>\n The president signed an executive order last Friday authorising the 10% tariffs just hours after the supreme court ruling. He later threatened to raise the rate to 15%, but did not officially do so by Tuesday 12.01am time in Washington, when the 10% levy came into effect.<\/p>\n However, Bloomberg<\/strong> is reporting that officials in the White House are working on a formal order that will increase the rate to 15%.<\/p>\n It comes after Trump declared this week that he can use tariffs in a \u201cmuch more powerful and obnoxious way\u201d.<\/p>\n The new tariffs, which Trump is applying under Section 122 of the 1974 Trade Act, have triggered uncertainty with a number of US trading partners, including the UK (which negotiated a 10% rate with the US last year) and the EU.<\/p>\n On Monday the EU paused the process of ratification of the deal it had struck with the US last July for the second time in a month, after it froze and unfroze the deal in the wake of Trump\u2019s Greenland threats. The deal was for 15% blanket tariffs on EU imports that were inclusive of previous levies.<\/p>\n Meanwhile in the UK, a spokesperson for Keir<\/strong> Starmer<\/strong>, when asked whether retaliatory tariffs were an option, said:<\/p>\n double quotation markNo one wants to see a trade war. No one wants to see a situation that\u2019s escalated. But as I say, nothing is off the table at this stage.<\/p>\n 5am GMT: EU car registrations<\/p>\n<\/li>\n 11am GMT: CBI Distributive trades for Feb<\/p>\n<\/li>\n 2pm GMT: Case-Shiller US home price index<\/p>\n<\/li>\n 2.15pm GMT: Bank of England governor to discuss MPC decision to hold interest rates at 3.75% with the Treasury Committee<\/p>\n<\/li>\n<\/ul>\n Share<\/span><\/span><\/p>\n Key events<\/p>\n <\/span>Show key events only<\/p>\n Please turn on JavaScript to use this feature<\/span><\/p>\n <\/span><\/p>\n Pill <\/strong>adds that changes to minimum wage and national insurance have had a particular effect on the employment of young people.<\/p>\n double quotation markI also would agree that some of the deeper structural changes, the fact that many sort of entry level jobs are being affected by AI, I think that is something that perhaps is difficult to manage.<\/p>\n The surveys that we see thus far talk about a lot of UK companies, taking up AI as a way of trying to improve productivity. As yet they don\u2019t report that resulted in a large reduction in their willingness or ability to employ labour. But of course, on a forward basis, I think that remains an open question.<\/p>\n I also think\u2026there are these issues, about the echo or long lasting effects coming out of Covid.<\/p>\n So, particularly\u2026having your first job is an important part of being able to enter the labour market and be productive. The more difficult that is, can have very long lasting effects. And they do cross with things like health issues, mental health issues and so forth.\u201d<\/p>\n Share<\/p>\n Huw Pill<\/strong>, who is the chief economist at the bank, touches on the state of the labour market.<\/p>\n double quotation markI think there has been an element of shedding labour that perhaps had been hoarded, in the period, following the end of the furlough, where the labour market was very tight and the difficulties in recruitment were intense.<\/p>\n Bailey <\/strong>adds that evidence that some of this \u201clabour hoarding\u201d is unwinding.<\/p>\n There is a reduction of labour, and companies appear to be not hiring.<\/p>\n double quotation markWe are not seeing a particular uptick in redundancies.<\/p>\n \u2026What we are hearing when we go around the country, is just not hiring.<\/p>\n \u2026There is an element to responding to the cost of employment.<\/p>\n Share<\/p>\n Bailey <\/strong>says that the Bank\u2019s expectations of 2% inflation in the late spring \u201cis pretty much baked in\u201d.<\/p>\n double quotation markIf you look at the latest number, it was pretty much exactly where we thought to was going to be.<\/p>\n \u2026If you look under the lid, goods price is a bit weaker\u2026. I think we are seeing some trade effects coming through. I think we\u2019re probably seeing some trade effects coming through from goods pricing from China\u2026Food prices were off a bit more than we expected. But services prices\u2026didn\u2019t come off as much as we thought they would.<\/p>\n Share<\/p>\n Megan Greene<\/strong>, who is a member of the monetary policy committee (MPC) and has voted consistently for hold on interest rates, says she has three concerns that she would want to see addressed before she votes for a cut.<\/p>\n double quotation markEmbedded in our central forecast is a nifty handoff where we hit our inflation target sooner and wager growth and inflation expectations come off just as the impact on fiscal policy on inflation sort of flips<\/p>\n \u2026I am little bit worried about that handoff not going as planned.<\/p>\n She says she would like to see further indications of wage growth continuing to come off, as well as inflation expectations for businesses and households.<\/p>\n Share<\/p>\n The governor of the Bank of England<\/strong>, Andrew<\/strong> Bailey<\/strong>, is now appearing in front of the Treasury Committee <\/strong>to talk about the Bank\u2019s decision to hold interest rates at 3.75%.<\/p>\n Bailey says that the bank is now expecting inflation to come back to around the 2% target \u201csooner than we were expecting\u201d.<\/p>\n It is now \u201cvery reasonable\u201d to expect that it will be around the target in the April number that is released in May, he says.<\/p>\n UK inflation slowed to 3% in January.<\/p>\n Share<\/p>\n Matt Britzman, <\/strong>senior equity analyst at the broker Hargreaves Lansdown<\/strong>, says the Meta<\/strong>\/AMD<\/strong> deal indicates the AI arms race has \u201cshifted up another gear\u201d.<\/p>\n double quotation markComing hot on the heels of Meta\u2019s recent Nvidia agreement, the message couldn\u2019t be clearer: AI infrastructure is priority number one. Meta is locking in supply, diversifying away from a single vendor, and doing whatever it takes to make sure its AI ambitions aren\u2019t bottlenecked by chips.<\/p>\n For AMD, this is a vote of confidence in its next-generation AI hardware \u2013 but having to give up a 10% stake suggests it could be struggling to generate organic demand.<\/p>\n That said, delivering solutions at this scale is a new test. Designing competitive chips is one thing; manufacturing, deploying and supporting them in volumes this large is another.<\/p>\n \u2026Zooming out, this deal underlines just how dominant Nvidia still is… AMD had to sweeten the agreement with a potential equity option \u2013 something you simply don\u2019t see Nvidia needing to do to secure demand. Nvidia remains the clear top dog in AI chips, with unmatched scale, software, and customer pull. AMD is making progress and carving out a role, but with Nvidia\u2019s results due tomorrow, we\u2019re expecting Jensen Huang to once again remind the market who\u2019s in charge.\u201d<\/p>\n Meta \ud83e\udd1d AMD<\/p>\n Today we\u2019re announcing a multi-year agreement with @AMD<\/a> to integrate their latest Instinct GPUs into our global infrastructure. With approximately 6GW of planned data center capacity dedicated to this deployment, we\u2019re scaling our compute capacity to accelerate the\u2026 pic.twitter.com\/a6lNWsfRci<\/a><\/p>\nThe agenda<\/strong><\/h2>\n
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Inflation at 2% “pretty much baked in” for the spring, Bailey says<\/h2>\n