Inflation at 4.4%

[Spiritual_Beggar]

Funny how little mention this is getting in teh media isn't it.......what with an election coming up and all.



So here we have Brown slating the Conservatives, saying everything they proposed would have killed the recovery dead. Yet, we will all find out the hard way that Browns QE idea was a short term solution with severe long term penalties.

[B17NNS]

Saw this yesterday, very disturbing. The news however seemed to vanish under a convienient cloud of ash.

[otolith]

I bet it hits the news after the election, though, at which point it will be the new government's problem...

[john_p]

Heh, if I add 5% onto my rates I wonder what my clients are going to say

[limpsfield]

While RPI is at 4.4%, the most common measure for inflation is actually 3.4%, which was still worse than expected.

There seems to be an assumption this is going to start edging down, but it is not at the moment and today's bank of England minutes suggested they are getting a little concerned.

http://news.bbc.co.uk/1/hi/business/8634156.stm

[Zod]

Don't worry. The LibDems will sort it all out.

La, la, la, la, la.

[anonymous-user]

Zod said:

Don't worry. The LibDems will sort it all out.

La, la, la, la, la.

[Scooby72]

That £200 billion was bound to start showing up at some point, even with Nu Labs phoney statistics.

[Somewhatfoolish]

Well fwiw GBP interest rate futures and their OTC equivalents have done enormous volume in last couple of days... and they ain't been moving to the dovish side...

[CDP]

musclecarmad said:

Guys,

This is big news unless I missed it no one seems to be batting an eyelid.

This is massively out of control but goes towards what we have been saying about inflating our debts away - 4.4% inflation is massive.

strange how interest rates are still sat on the floor and they are talking about inflation falling back but i'm not so sure. it's up on last month.

4.4% inflation, 2.5% pending vat rise, 1% national insurance rise, 3% compulsory employer payment into a pension all in the pipeline - people are going to be massively worse off.

Considering the pound has dropped from over $2 to the $1.50s and the amount of stuff we import I'm amazed inflation isn't in double figures. It suggests to me the economy is in a worse state than the ruling classes want to let on.

[markcoznottz]

anonymous said:

[redacted]

What youre saying is the governments official inflation rate isnt worth the paper its printed on?.....

[Bing o]

anonymous said:

[redacted]

And it won't take a significant rise in interest rates to see lots of people who have been scraping by on IO Tracker mortgages going to the wall either.

[b2hbm]

anonymous said:

[redacted]

Oh, I'm glad it's not just me then....

If it wasn't for the election there would have been interest rate rises by now, but even a 0.5% increase would spell bad news for Gordy, showing the public that things really were going to get tighter and it's not just "something for the future". Which I'm sure a lot of folks are hearing but not believing.

I can't help but think the media are helping things along by focusing on the lower CPI figures which are more easily fiddled by changing "the basket of goods". Example - did I read they'd chucked out cd/dvd players and included blue ray players when they showed an annual drop a few months back ? And to quote from the National Statistics themselves...

National Statistics said:

RPIX inflation – the all items RPI excluding mortgage interest payments – was 4.8 per cent in March, up from 4.2 per cent in February.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate in February was above the provisional figure for the European Union. The UK rate was 3.0 per cent whereas the EU’s as a whole was 1.4 per cent.

Mortgage interest is probably the one thing holding it down, and that's entirely due to the low base rates. 4.8% would normally mean interest rates flying upwards, strengthening the £ and reducing import costs - this election timing is really inconvenient.....

Like the OP and many on here I estimate my inflation on the bills I'm getting, and I'd say it's been above 5% for a while now so clearly the gubbinmint plans to let inflation rise like in the past to erode the debt. Only this time I'm not so sure, there seems to be more inflation-linked bonds around now, and some of the biggest future govt spending will be in the public sector wage bills, benefits and index-linked pensions. And the latest oil price rises haven't worked through yet either - RPIX over 5% in May anyone ?

[CDP]

anonymous said:

[redacted]

I think it's more an indication of how bad things are in the private sector that few businesses feel able to pass input price rises on. Margins are squeezed and squeezed again.

[blueg33]

Did an RPI Swap (a financial derivitive that smooths RPI risk over a 25 year period) yesterday on a £20m deal and the rates were down on a similar size swap I did in Feb. I guess that means that the banks longterm view is a bit better than it was previously.

But I think we have a few years of RPI pain particularly relating to everyday stuff like food and fuel.

[Yeast Lord]

Correct me if I'm wrong but aren't most the government's debts index linked therefore what exactly is getting inflated away?

[Carfiend]

The fact that electronics are in the figures at all is a joke since the cost of them over time declines sharply due to lower manufacturing costs as the technology is taken up and improvements in designs.

For example a 1gb USB Thumb drive would of cost you about £200 or so 5 years ago and now they are more or less giving them away.

[Beardy10]

anonymous said:

[redacted]

That's not quite right. Inflation fell (i.e. the economy shrank) because of the massive contraction in credit available to individuals and companies. Interest rates were cut along with a massive injection of liquidity to try to deal with that situation. The trouble is that those low interest rates are a relatively blunt instrument when the banks that actually lend to the individuals and companies (obviously BoE does not lend directly) have such badly impaired balance sheets that the low interest rates are actually used by them to help them repair their balance sheets (i.e. they borrow from BoE at virtually zero and lend it on at anywhere between 2 and 10% depending on the product) by increasing their interest margin.

So...if they raise interest rates it will not have a direct 1 for 1 effect on the economy (as it didn't when they cut interest rates) but it will slow down the repairing of the banking system.

Basically interest rates are not quite as potent as they would normally be for as an instrument of economic policy.

[john_p]

I think it's possible to take advantage of deals and BOGOFs etc at the supermarket - I don't recall my supermarket shop going up by stellar amounts, we just buy whatever's on offer - BUT as soon as you step onto the high street it's a totally different story. Small retailers get screwed by increasing rent, rates, staffing, and prices go up as a result.

£3.50 for a sandwich at the local sandwich place? No thanks.

[otolith]

musclecarmad said:

maybe it's because people feel we are coming out of recession so they can put up prices.

Or because they are trying to cover increases in their own cost of living or in the cost of doing business. There's a lack of confidence related vicious circle in there somewhere.