Business

UK Inflation Surges to 3%, Delaying Hopes for Interest Rate Cuts

Published

3 days ago

February 19, 2025

RTX

The UK’s inflation rate jumped to 3% in January, reaching a 10-month high and exceeding expectations, according to official data from the Office for National Statistics (ONS). The latest figures, up from 2.5% in December, cast doubt on the likelihood of imminent interest rate cuts by the Bank of England (BoE), as inflation remains well above the central bank’s 2% target.

Unexpected Spike Raises Concerns

Economists had forecast a rise to 2.8%, but the higher-than-expected jump caught analysts by surprise. The increase was largely driven by rising airfares, food prices, and private school fees, following the Labour government’s tax hike on private schools.

The unexpected surge is likely to trouble BoE policymakers, who are already grappling with sluggish economic growth. Earlier this month, the central bank cut interest rates by 0.25 percentage points to 4.5%, marking its third reduction in six months. The move came as the BoE halved its 2025 growth forecast to just 0.75%, reflecting a weak economic outlook.

With inflation still above target and growth remaining sluggish, concerns are mounting over the government’s ability to revive the economy. The Labour Party, which won the July general election, has struggled to boost consumer confidence, and its popularity has dipped amid disappointing economic indicators.

Rate Cuts Likely to Be Delayed

Economists now expect inflation to climb further in the coming months, driven by rising domestic energy bills. However, many anticipate a gradual decline in the second half of the year, which could give the BoE room for additional rate cuts—though less aggressively than previously expected.

“Another rate cut in March looks pretty unlikely, with the Bank continuing with its gradual pace of easing for now,” said Luke Bartholomew, deputy chief economist at abrdn. “Any acceleration in rate cuts will depend on inflation falling closer to 2%.”

Financial analysts have echoed similar concerns, noting that while lower mortgage rates and falling food costs provide short-term relief, the broader economic picture remains uncertain.

“The sharp uptick in inflation demonstrates the tightrope the Bank is walking,” said Nick Saunders, CEO of Webull UK. “While some costs are easing, the 3% inflation rate is a real cause for concern.”

Market Reaction and Economic Impact

The unexpected inflation jump has already impacted currency markets. The British pound initially surged following the data release but quickly retreated, reflecting uncertainty over the BoE’s next moves.

“This was an unexpectedly large jump,” said David Morrison, senior market analyst at Trade Nation. “The ONS data shows that rising transport, food, and beverage costs were key contributors. Today’s hotter-than-expected numbers will make it harder for the Bank of England to cut rates further.”

With inflation trending higher than forecast, some analysts warn that further price increases could be on the horizon, especially with potential trade disruptions linked to U.S. tariff policies.

“Inflation is now 1% above target and heading in the wrong direction,” said Laith Khalaf, head of investment analysis at AJ Bell. “The Bank of England expects inflation to hit 3.7% in the third quarter. Meanwhile, rising National Insurance and the National Living Wage from April could further fuel inflationary pressures.”

While the BoE maintains that inflation will eventually return to 2%, the latest figures suggest the path to stability may take longer than expected. For now, businesses and consumers should brace for continued economic uncertainty, as interest rate cuts remain on hold—at least in the short term.

Business

World’s Largest EV Manufacturer Recalls Over 375,000 Vehicles for Power Steering Issue

Published

17 hours ago

February 21, 2025

RTX

The world’s largest electric vehicle manufacturer is recalling more than 375,000 vehicles due to a power steering issue that could impact driver control, according to the US National Highway Traffic Safety Administration (NHTSA).

The recall affects certain 2023 Model 3 and Model Y vehicles, with the NHTSA reporting that the printed circuit board responsible for electronic power steering assist may become overstressed. This could result in a loss of power steering assistance when the vehicle stops and then accelerates again.

A loss of power steering assistance requires drivers to exert greater effort to steer the vehicle, particularly at low speeds, increasing the risk of accidents.

The EV manufacturer has not disclosed the number of incidents linked to the issue but stated that it is working to address the problem promptly. Owners of affected vehicles will be notified and offered free repairs, including replacement of the faulty circuit board if necessary.

The NHTSA advises vehicle owners to monitor their dashboard warning lights and seek service immediately if they notice any changes in steering performance. The agency is continuing to monitor the situation to ensure compliance and safety.

This recall comes as the electric vehicle industry faces heightened scrutiny over software and hardware reliability. Despite the setback, industry analysts believe the company’s proactive recall could help maintain customer trust and highlight its commitment to safety and product quality.

Business

Alibaba Reports Fastest Revenue Growth in Over a Year Amid AI Boom

Published

17 hours ago

February 21, 2025

RTX

Chinese e-commerce giant Alibaba Group Holding has reported its fastest revenue growth in more than a year, driven by advancements in artificial intelligence and cloud computing. The company’s revenue for the quarter ending in December rose 8% to 280.2 billion yuan (€36.65 billion) compared to the previous year, surpassing analysts’ expectations. Net income surged to 48.9 billion yuan (€6.41 billion), boosting its New York-traded stock by over 12% following the earnings announcement.

Alibaba CEO Eddie Wu highlighted the company’s commitment to AI, stating during an earnings call that Alibaba plans to “aggressively invest” in AI and cloud infrastructure over the next three years, with planned spending expected to exceed its total investments of the past decade. Wu emphasized that artificial general intelligence (AGI), which aims to match or surpass human intelligence, is Alibaba’s primary focus, describing the opportunity as a “once-in-several-decades” transformation for the industry.

The company has already integrated AI into its cloud products, resulting in a 13% revenue growth for its cloud division—the fastest pace in two years. Alibaba’s international commerce unit, including platforms like AliExpress and Lazada, saw a 32% increase in revenue, driven by robust cross-border business performance.

Alibaba’s AI strategy comes amid growing competition between the U.S. and China in the AI sector. In January, Alibaba introduced its latest Qwen AI models, which performed well in industry benchmark tests, positioning the company among China’s leading AI innovators. Additionally, Alibaba is collaborating with Apple to integrate its AI technology into Chinese iPhones.

The company’s resurgence follows a challenging period marked by regulatory crackdowns in China’s technology sector. In 2020, authorities halted the IPO of Alibaba’s financial affiliate, Ant Group, and imposed a record $2.8 billion (€2.67 billion) fine for anti-monopoly violations. However, recent signs suggest a more supportive stance from Beijing. Chinese President Xi Jinping recently met with prominent entrepreneurs, including Alibaba cofounder Jack Ma, signaling renewed government backing for the tech industry.

Amid these developments, Alibaba’s stock has surged by over 60% this year, with U.S.-listed shares rising 8.5% to $136.58 (€130.41) during morning trading. With its focus on AI and cloud computing, Alibaba is well-positioned to capitalize on the growing demand for advanced technology in China and beyond.

Business

Airbus Reports Strong Orders and Steady Growth Despite Supply Chain Challenges

Published

2 days ago

February 20, 2025

RTX

European aircraft manufacturer Airbus has reported solid financial results for 2024, with strong order intake and increased deliveries, further extending its lead over struggling competitor Boeing.

In its annual earnings update on Thursday, Airbus revealed that revenues rose to €69.23 billion, up from €65.45 billion in the previous year. However, adjusted earnings before interest and tax (EBIT) dropped 8% to €5.35 billion, compared to €5.84 billion in 2023. The decline was attributed to restructuring costs in the company’s space division.

Aviation and tourism expert Anita Mendiratta praised Airbus’ performance, stating that the results highlight the company’s focus on fundamentals. “The strong order intake across all divisions signifies sustained market confidence—critical in 2024, the first full year since the pandemic when trade not only recovered but surged,” she said.

Aircraft Deliveries and Orders

Airbus delivered 766 commercial aircraft in 2024, an increase from 735 in 2023, thanks to a strong year-end push. Gross commercial aircraft orders reached 878, with net orders totaling 826 after cancellations.

Looking ahead, Airbus has set a delivery target of 820 commercial aircraft for 2025—a figure lower than its record 863 deliveries in 2019. While some analysts view this target as conservative, Matt Dorset, equity analyst at Quilter Cheviot, noted that it reflects ongoing supply chain issues. “The company will want to avoid another cut to guidance, as occurred in 2024,” Dorset explained.

Airbus lowered its delivery targets in June 2023 due to supply chain disruptions involving engines, aerostructures, and cabin equipment, as well as additional costs in its space systems division. The company continues to face challenges, particularly with Spirit AeroSystems, which is affecting the production of the A350 and A220 models.

Financial Outlook and Dividends

For 2025, Airbus forecasts adjusted EBIT of approximately €7 billion and free cash flow before customer financing of around €4.5 billion. These projections do not account for potential tariffs that could be imposed by a future Donald Trump administration in the United States.

Despite ongoing challenges, Airbus announced an increased dividend of €2 per share for 2024, up from €1.80 the previous year. Additionally, the company proposed a special dividend of €1 per share, with a payment date set for April 24, 2025.

Airbus Extends Lead Over Boeing

Airbus’ stable financial performance contrasts sharply with the difficulties faced by Boeing, which reported a loss of $11.8 billion (€11.3 billion) in 2024—its worst result since 2020. Boeing’s setbacks include a series of safety incidents, strikes, and challenges within its defense programs, further solidifying Airbus’ position as the world’s leading aircraft manufacturer.