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Chart of the day: No change from the Bank of England, Federal Reserve or European Central Bank (Yawn, slight return)

A day of rest for the central banks, it seems.

Yesterday, the Federal Open Market Committee decided offer no additional monetary easing. The Wall Street Journal, home of Jon Hilsenrath, who is often spot-on when it comes to Feb predictions, thinks that they may make a move next month (£), but for now, the committee seems to be taking the view that stable (albeit low-ish) growth and low inflation beats taking the risk of an inflation spike to tackle the high – and calcifying – levels of unempolyment.

The Bank of England also decided to take no action, keeping rates at half a percent and maintaining QE at £325bn. Unlike the FOMC, the monetary policy committee doesn't release its minutes until after the rate decision, so we can't know the reasoning behind its (lack of) action, but in all likelihood the constantly dropping inflation is luring it into a sense of security. Admittedly, that security isn't backed up by any other aspect of the economy, but despite Cameron's claim to be a "fiscal conservative but a monetary activist", neither he nor Osborne have made any move to changing the Bank's aim from stabilising inflation to a broader targeting of nominal GDP.

And the European Central Bank also declined to do anything to its rates, after slashing the deposit rate to a record low last month. But it did announce some unconventional monetary policy, as expected - and much bigger than anyone predicted. The FT reports:

The ECB can make outright purchases in open market operations "of a size adequate to reach its objectives," Mr Draghi has said. That almost certainly means a re-vamped bond buying programme.

So not every central banker is asleep at the wheel. Can it save the euro? Probably not. But it may delay some of the pain.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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A simple U-Turn may not be enough to get the Conservatives out of their tax credit mess

The Tories are in a mess over cuts to tax credits. But a mere U-Turn may not be enough to fix the problem. 

A spectre is haunting the Conservative party - the spectre of tax credit cuts. £4.4bn worth of cuts to the in-work benefits - which act as a top-up for lower-paid workers - will come into force in April 2016, the start of the next tax year - meaning around three million families will be £1,000 worse off. For most dual-earner families affected, that will be the equivalent of a one partner going without pay for an entire month.

The politics are obviously fairly toxic: as one Conservative MP remarked to me before the election, "show me 1,000 people in my constituency who would happily take a £1,000 pay cut, then we'll cut welfare". Small wonder that Boris Johnson is already making loud noises about the coming cuts, making his opposition to them a central plank of his 

Tory nerves were already jittery enough when the cuts were passed through the Commons - George Osborne had to personally reassure Conservative MPs that the cuts wouldn't result in the nightmarish picture being painted by Labour and the trades unions. Now that Johnson - and the Sun - have joined in the chorus of complaints.

There are a variety of ways the government could reverse or soften the cuts. The first is a straightforward U-Turn: but that would be politically embarrassing for Osborne, so it's highly unlikely. They could push back the implementation date - as one Conservative remarked - "whole industries have arranged their operations around tax credits now - we should give the care and hospitality sectors more time to prepare". Or they could adjust the taper rates - the point in your income  at which you start losing tax credits, taking away less from families. But the real problem for the Conservatives is that a mere U-Turn won't be enough to get them out of the mire. 

Why? Well, to offset the loss, Osborne announced the creation of a "national living wage", to be introduced at the same time as the cuts - of £7.20 an hour, up 70p from the current minimum wage.  In doing so, he effectively disbanded the Low Pay Commission -  the independent body that has been responsible for setting the national minimum wage since it was introduced by Tony Blair's government in 1998.  The LPC's board is made up of academics, trade unionists and employers - and their remit is to set a minimum wage that provides both a reasonable floor for workers without costing too many jobs.

Osborne's "living wage" fails at both counts. It is some way short of a genuine living wage - it is 70p short of where the living wage is today, and will likely be further off the pace by April 2016. But, as both business-owners and trade unionists increasingly fear, it is too high to operate as a legal minimum. (Remember that the campaign for a real Living Wage itself doesn't believe that the living wage should be the legal wage.) Trade union organisers from Usdaw - the shopworkers' union - and the GMB - which has a sizable presence in the hospitality sector -  both fear that the consequence of the wage hike will be reductions in jobs and hours as employers struggle to meet the new cost. Large shops and hotel chains will simply take the hit to their profit margins or raise prices a little. But smaller hotels and shops will cut back on hours and jobs. That will hit particularly hard in places like Cornwall, Devon, and Britain's coastal areas - all of which are, at the moment, overwhelmingly represented by Conservative MPs. 

The problem for the Conservatives is this: it's easy to work out a way of reversing the cuts to tax credits It's easy to see how Osborne could find a non-embarrassing way out of his erzatz living wage, which fails both as a market-friendly minimum and as a genuine living wage. A mere U-Turn may not be enough. 


Stephen Bush is editor of the Staggers, the New Statesman’s political blog.