There were some glum faces yesterday at the Office for National Statistics on the announcement that consumer price inflation remained unchanged in July at 1.8 per cent in July, after forecasts that it would drop sharply for the month to 1.5 per cent.

Hopes were that after the Bank of England had extended its quantitative easing programme by £50 billion taking it up to £175 billion, that inflation figures would react accordingly. The fact that they didn’t points to signs that the recession is deeper than analysts have been calling till now. During the last 16 months inflation has proved higher than analysts predicted on no less than 12 occasions.

The Building Societies Association (BSA), the body appointed to represent Britain’s mutually-owned lenders, has issued a complaint to Europe’s anti-trust regulator. The complaint is regarding a planned restructuring of state-owned bank Northern Rock, that the organization claims would distort competition in the mortgage market.

BSA has requested from the European Commission to ensure that Northern Rock be made to pay financial penalties if the proposed overhaul goes ahead.

The Commission is due to deliver its verdict in the autumn, with a negative verdict liable to cause a major setback in the British government’s efforts to restore Northern Rock to financial health and sell it back into private ownership

Spiralling costs seems to be hitting home everywhere, with the news that the cost of running the Houses of Parliament has reached almost half a billion pounds in 2008-9 being another example. The costs of operating the UK seat of government is proving to be an increasingly expensive pastime, with costs up

more than £12 million from 2008 arriving at close to £400 million, a sum that includes salaries, allowances and pensions for MPs and their administrative staff. One the upside, the costs of maintaining the House of Lords dropped by almost a third from £152.5 million to £106.5 million. There must be a message there, somewhere.

The news that the Royal Bank of Scotland Group PLC is close to putting its asset management business up for sale, will be good news for most, but not for those who bank at Coutts, the private bank owned by RBS, renowned as an adviser to the Queen, that will be included in the package and may well fall into foreign hands.

On the FTSE, shares in African Minerals, the iron ore mining company, managed by Regal Petroleum founder Frank Timis, rose 1.6 per cent to 312 pence on news that the company had embarked on takeover talks with Eurasian Natural Resources Corporation (ENRC).

Shares in the Sierra Leone-based group have risen 13-fold this year amid speculation of interest from several parties including ENRC.

In the retail sector Tesco’s shares were the weakest, falling 0.5 per cent to 363 pence after industry data for July showed a poorer month.

Credit checking agency Experian inched 0.4 per cent higher to 517 ½ pence after suggestions from the US Federal Reserve that lending supply was improving.

The FTSE 100 made up for most of yesterday’s reverses rising 40.77 points to close on 4685.78. The FTSE 250 recovered after a major collapse on Monday, rising 80.39 points to close on 8,354.48

According the BOE Governor Mervyn King the pound’s biggest five-month rally in 24 years may be stuttering to an end, largely due to the Bank’s flooding the U.K. economy with newly printed cash.

Sterling soared in value by 23.5 percent from March 10 to Aug. 5 on speculation U.K. assets would rise as the worst financial crisis in six decades eased. The rally appeared to be petering out and the pound has slumped 2.6 percent since Aug. 5 to last week’s $1.6543 close. However on Tuesday, the pound improved a little on figures showing inflation proving far more resistant to recession than economists had expected.

• Pound/US dollar 1.6353
• Pound/Euro 1.169
• Pound/Japanese Yen 156.3554
• Pound/Swiss Franc 1.777

In the US, news that construction starts of new homes had fallen in July, after three straight months of increases caused no little construction.

The number of new properties sold for last month fell 1% to an annual rate of 581,000.

US wholesale prices also recorded an unexpectedly large fall last month, down 0.9% from June, and by 6.8% from July 2008.

The Dow Jones Industrial Average recovered part of the previous day’s losses rising 82.6 points t to close on 9217.94. The NASDAQ moved up 25.08 points to close on 1955.92.

The ongoing weak demand for personal computers and printer ink has seen Hewlett-Packard (HP) Revenue fell by 2% to $27.5 billion, not encouraging but better than Wall Street estimates.

Like most technology firms, HP has suffered in the global downturn as consumers trim their spending.

Meanwhile that perennial optimist the International Monetary Fund (IMF) has woken up to remind us that the world has indeed begun to recover from recession, adding that the process will not be simple.

A chief economist for the IMF warned that the recession had "left deep scars, which will affect both supply and demand for many years to come"

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