Thursday 19/02/26

Trump adviser says New York Fed economists should be ‘disciplined’ for publishing study on tariffs (Financial Times, Myles McCormick) cites the director of the National Economic Council who said in an interview on CNBC yesterday that Federal Reserve economists should be “disciplined” for publishing a report which said that US businesses and consumers were the ones paying the most for Trump’s tariffs. Kevin Hassett said that the study was an “embarrassment” and failed to include the full effect of the tariffs. He said “It’s I think the worst paper I’ve ever seen in the history of the Federal Reserve system”. * SO WHAT? * Wow. Publish a paper that the government doesn’t like and they throw all their toys out of the pram. And these people are supposed to be adults – and qualified ones at that. It seems to me that corporates are having to jack up their costs and Americans are feeling the impact through their weekly grocery shop. To me, I would always take the word of what corporates are saying in their numbers and what consumers are feeling on the day-to-day over what politicians have to say.

Donald Trump’s AI push fuels revolt in Maga heartlands (Financial Times, Joe Miller) shows that even the MAGA faithful are having their resolve tested because they don’t want to live next to massive datacentres that suck up water and electricity. * SO WHAT? * Trump’s administration has been doing all it can to support the AI cause by fast-tracking permits for datacentre construction and approving the sale of advanced chips to China whilst also protecting AI companies from the crackdown on chatbots. Along with affordability issues, the growing problems related to rapid AI expansion could damage the Republican cause heading into the midterms at the end of the year. A poll by Public First for the FT showed that about 60% of Trump voters were worried about the rapid development of AI and almost 80% think that the tech needs more regulation. Opposition to this rapid AI-related roll-out has been gaining momentum as dozens of data centre developments have been delayed because of local push-back in places including Kentucky, Georgia, Texas and other Republican states.

Then in Texas town blocks ICE detention centre in backlash to Trump crackdown (Financial Times, Guy Chazan) we see further evidence of push-back as the owner of a warehouse in Hutchins, Texas, has refused to sell or lease the property to the US government. The US Department of Homeland Security (DHS) approached the owner with a view to buying the property to use as a detention centre for illegal immigrants. The DHS has been looking at ways of expanding its capacity to detain, process and deport illegal migrants. * SO WHAT? * OK, so this is just one property (other sites have been found and purchased) but it does show that there is some resistance to the administration’s immigration policies. It does sound like the owner of the property had been under a lot of local pressure not to sell up to the DHS. Activists will take heart from this and you wonder whether they will become a growing force if they manage to co-ordinate with similar-minded groups in other states.

Elsewhere, Canada’s Liberal Party inches closer to majority as third Tory MP defects (Financial Times, Ilya Gridneff) shows that Carney’s party is inching closer to getting a parliamentary majority after another Conservative MP defected to the Canadian PM’s government. Mark Carney’s government has been luring opposition MPs over to their side so they can get a majority that will ease the pushing through of reforms. At the moment, Carney has had to rely on opposition support to pass legislation. * SO WHAT? * At the moment, Carney is riding high with a 60% approval rating since he took office but he’s got a tricky year ahead of him what with the US-Mexico-Canada free trade agreement review scheduled for July against the backdrop of ongoing Trump tariffs on Canada’s lumber, steel, aluminium and cars.

Meanwhile, in Europe, Christine Lagarde to leave ECB before the end of her 8-year term (Financial Times, Olaf Storbeck, Mercedes Ruehl and Sarah White) shows that the president of the ECB is looking to end her term before the French presidential election in April next year in order to facilitate France’s Macron and Germany’s Merz choosing her successor rather than run the risk of a populist Eurosceptic (someone supported by Rassemblement National, for instance) getting a say in who gets the role. The official date of Lagarde’s departure is October 2027. Spain first to enter race for Lagarde succession at ECB (Financial Times, Olaf Storbeck, Barney Jopson, Anne-Sylvaine Chassany and Sam Fleming) shows that Spain has openly expressed an interest in fielding a candidate to get the top job at the ECB in what would be the first time for a Spaniard to become the ECB president in the ECB’s 28-year history! The official line is that Lagarde is going to stay to the end of her term but…

Back home, UK inflation falls to 3%, boosting hopes of early cut in interest rates (The Guardian, Phillip Inman) shows that inflation suddenly dropped in January to its lowest level since March last year. Along with the disappointing jobs data, this makes it more likely that the Bank of England will cut interest rates at its meeting next month. Falling prices for petrol, air fares and food drove the level down. The Bank’s inflation target remains at 2%, which it believes will be reached this year.

Reeves to do ‘as little as possible’ in Spring Statement despite pressure to spend (Daily Telegraph, Tim Wallace) suggests that the chancellor is likely to ignore calls to change tax and spending plans in the upcoming Spring Statement to maintain Labour’s manifesto pledge to only have one major fiscal event per year. The idea is to project the impression of economic stability. One Treasury source even went as far as saying “We want this to be a complete non-event”. Well that would make a change!

Amidst all the gloom about employment at the moment, Ministers look at slowing plan to increase minimum wage for younger UK workers (Financial Times, David Sheppard) shows that ministers are reconsidering their plans regarding the implementation of the minimum wage increase due to booming youth unemployment. That being said, Starmer appeared to pour cold water on that yesterday when he said that the government won’t U-turn on the matter of removing “the discriminatory age bands”. The increase already announced for April is going to go ahead as scheduled. It’s not sounding good for job prospects for younger people though – unless the economy picks up in a meaningful way. Gail’s boss: ‘Mood among employers is darkest I’ve ever seen’ (Daily Telegraph, Hannah Boland) cites Luke Johnson, the serial entrepreneur best known for being the man behind Pizza Express among other ventures, who observes the dour mood among employers. He said that “I’ve spent 40 years growing businesses and creating jobs, and the mood amongst employers and those who invest in this country is the darkest I’ve ever seen”. * SO WHAT? * Employers have got a LOT to contend with, what with NIC rises and the business rates hike. The timing of this increase isn’t great and is unlikely to improve the jobs situation.

City law firm uses AI chatbot to interview graduates (The Times, Catherine Baksi) shows that Mishcon de Reya is currently using a chatbot for first-round interviews with potential hires. The law firm maintains that the AI tool uses information from candidates’ applications to give them a “tailored interview”. Interestingly, the candidates don’t have to write a long application form and instead expand on their experiences and motivations during the interview. A transcript of the interview is then reviewed by the early careers team. The firm says that the candidates will be able to tell them more about themselves rather than being limited by an application form. The AI tool was developed by Bright Network, the graduate careers platform. * SO WHAT? * This sounds quite interesting and, given the data that Bright Network must have amassed over the years about candidates, should be pretty good. I can imagine that this will get pretty popular because I would have thought that more candidates can be screened this way and presumably tweaks can be made to increase the chances of getting the most suitable candidates. I do wonder, though, whether we’ll eventually see AI that does things the other way around – that as a candidate you can put in your details and AI will recommend which companies would be most suitable for you.

Just imagine the volumes you could get from that! You could charge candidates a small fee and then corporates a bigger fee so you’d get “double bubble”! This would also help candidates out because they could apply for jobs that they actually stand a chance of getting. The “candidate” version could even pinpoint why a company is a good fit and why you were singled out. This could save both companies and candidates huge amounts of time I would have thought! Obviously, its efficacy will hugely depend on the accuracy of the tech and the ongoing input of the companies that are on it. As an aside, I would say that I believe that if HR made more of exit interviews and kept tabs with ex-staff and what they do, they may be able to better target candidates at the beginning of the recruitment process.

In property-related news, Biggest drop since financial crisis for inner London house prices (The Times, Tom Howard) cites the latest ONS data which shows that house prices in inner London boroughs fell by 4.6% on average during 2025. This is the biggest annual drop since 2008! Central areas suffered most while prices the ‘burbs remained steady or increased. * SO WHAT? * It seems that things are stabilising in the property market at the moment – and with the likelihood of more interest rate cuts this year, you would have thought that the market will continue to strengthen.

Why is the UK falling back in love with credit cards? (Financial Times, Lex) is an interesting article that highlights the rising use of credit cards over the course of last year. NatWest, Lloyds and Santander UK all reported double-digit percentage growth in their credit card books over 2025 while Barclays said that customer balances were at their highest level since 2017. Bank of England data shows that net credit card lending grew by 12.4% year-on-year in December while outstanding debt reached an all-time high of £78bn. * SO WHAT? * Pessimists will interpret this as a sign that consumers are having to turn to credit cards to fund daily life because of years of high inflation while optimists will say that it’s a sign that consumers are willing to spend. The most recent GfK consumer confidence survey suggests that households are feeling more positive about their finances despite the tricky economic backdrop and the willingness to make big purchases is at its highest level since early 2022. I would suggest that this is good news for banks’ prospects and bad news for BNPL players like Klarna because there is clearly more competition now!

In a quick scoot around some of today’s other interesting stories, Plug-in hybrids use three times more fuel than manufacturers claim, analysis finds (The Guardian, Kate Connolly) cites large-scale analysis from the Fraunhofer Institute which shows that Plug-in Hybrid Electric Vehicles (PHEVs) use way more fuel on the road than official manufacturer marketing implies. This is the most comprehensive study to date and its findings are based on the data transmitted wirelessly by PHEVs from a number of manufacturers while they were on the road. All the cars were produced from 2021 to 2023. The study says that the vehicles actually require about 300% more fuel to run than had previously been thought. * SO WHAT? * Well this will be a bit of a shocker for some but I’m not sure whether this is going to affect sales all that much because it seems to me that consumers are voting with their wallets and buying cars that they believe get the best of both worlds – better fuel consumption without the charging anxiety that some people get with EVs. Still, it’s not great!

In UCL students win £21mn over Covid disruption in watershed UK settlement (Financial Times, Laura Hughes and Alistair Gray) we see that a group of around 6,500 students has come to a “confidential” agreement with UCL regarding compensation for Covid disruption. Lawyers for 194,000 claimants at 36 other universities will be watching this decision closely. A large chunk of the compensation will be going to litigation funders. Law firms Asserson and Harcus Parker have said that more claimants are signing up. * SO WHAT? * Clearly, there was huge disruption over Covid that tarnished the whole university experience for a huge number of people. However, universities are already cash-strapped and suffering, so such compensation claims are going to add to their woes and potentially negatively affect the experiences of current and future students. No-one’s really going to win from this.

Then in Britons living in EU face repayment hikes amid Reeves student loans row (The Guardian, Rupert Jones) we see that the government’s decision to lower the salary threshold where repayments of student loans kick in on some UK nationals working in Germany and Belgium is going to result in a sudden rise in monthly repayments. Those who earn above the threshold have to repay 9% of everything they earn above this level. Some people say that their monthly loan repayments will double as a result. This is another kick in the teeth for the UK’s graduates…

In tech-related news, UK to require tech firms to remove abusive images within 48 hours (Financial Times, Kieran Smith) shows that tech companies are going to be forced to take down abusive images from the internet within 48 hours of being reported or face fines of up to 10% of their global revenues or even have their services blocked in the UK under new laws being put forward by PM Starmer. This is part of a wider strategy to cut down violence towards women and girls. * SO WHAT? * This is way overdue in my opinion. Let’s hope it gets implemented and that tech companies actually abide by it.

British researcher raising $1bn to build superhuman intelligence (The Times, Louisa Clarence-Smith) highlights the efforts of a leading British scientist, a former AI researcher at Google DeepMind, to raise $1bn in funding for his London-based start-up, Ineffable Intelligence. The company is trying to build AI that learns for itself to solve problems that humans can’t. This would be a great boon for British AI which feels like the much poorer version of its far glitzier San Francisco cousin!

You know that Watson’s Daily always has your back, right? Well I thought just in case you found yourself in icy conditions, had a spare outboard motor and an ice saw on you here’s a way to protect yourself from polar bears! It also doubles as a pretty useful treadmill. However, my main question is, what happens when the fuel runs out 🤣??