Is UK inflation becoming a worry?
Discussion
ATM said:
Panamax said:
And when you repay your loan of "new money" created by the bank it goes out of existence in the same way it came into existence. So it's all just a question of how much lending the banks are permitted to do at any particular time.
Absolutely Banks create money and destroy it
The government set the rules and the banks play within them
We had the GFC right and we bailed out the banks with QE and now we're here. But you do realise the GFC was caused by the banks creating too much money too quickly. So they created the problem and got their bonuses. Now they're getting even bigger bonuses making more profits than ever. Why because we're all renewing mortgages at these newer higher rates.
Meanwhile the government is encouraging the banks to lend more and more not slowing them down
The 35 year mortgage is all above board
The 5 and 6x salary multiplier all approved
The government s debts are spiralling out of control
The world isn't interested in buying our government debt
So the interest rate the government pay is going up
And the interest rate we pay on our mortgages is related to long term rates so also going up
And all while the value of our currency is going down
So we're getting double F'ed
Run
Run
Run
You need out of anything G7 or related
Parity with Swiss francs within 6 months.
borcy said:
I guess that's my point, what decision are people expected to make?
To swap currency for assets. Gold, property, shares, bitcoin take your pick. The days of currency as a store of value are pretty much over. I have a small contingency in a bank account that would cover a couple of months of essentials if it all goes wrong. Everything else goes into shares/funds. Jon39 said:
ATM said:
Me again
Just checking we all know banks create money. Every time they create a loan it s new money. This is how the money supply has changed since 1997. Yes there is over 3 times as many pounds now as there was in 1997. Most were created by Banks and someone is paying interest on all of those to a bank.
https://www.ons.gov.uk/economy/grossdomesticproduc...
Just checking we all know banks create money. Every time they create a loan it s new money. This is how the money supply has changed since 1997. Yes there is over 3 times as many pounds now as there was in 1997. Most were created by Banks and someone is paying interest on all of those to a bank.
https://www.ons.gov.uk/economy/grossdomesticproduc...
When reading your post, I wondered how the value of money has changed during that same time period.
Money supply;
Using the chart scale, about 1,000,000 to 3,000,000.
Inflation (RPI);
1,000,000 to 2,650,000
But I'm not arguing for only one way - it's the other way or both ways.
We had negative interest rates in Europe. That is complete and absolute madness If You Ask Me. Their reason to prevent deflation.
If we import most of our goods from China and China are lowering prices we lower interest rates to negative. How does that make sense?
We know how retail in the UK has dissappeared amd Amazon and Alibaba now control the world. Well surely this has lowered prices right. But our RPI was steadily increasing by around 2% or less.
I'm not some economics expert. I'm just saying why are we so fixated on the price of a basket of goods which we have very little control over.
And now that Amazon and Alibaba have lowered prices to almost zero can they get any lower or have they levelled off or worse started rising. If these worldwide prices start changing Upwards we'll see more RPI increasing or we have already. Then our government will have to raise rates on government debt which are index linked [gilts] because China is increasing prices. How does that make sense?
It doesn't does it.
When we were a small little country making our own stuff monitoring prices made more sense maybe. But now importing everything from all over the world or mainly China it doesn't.
That's my I'm not an economist view.
greengreenwood7 said:
@Bluestar - agreed Tories left a mess, but not as much of a mess as we have now.
Like Jon & ATG, i think ( know) the figures are fudged, whether its inflation or otherwise...I was half listening to something a cple of days ago which suggested that GDP has been tweaked (for Pharma) to include manufacturing done by a UK based company overseas.
Think we've gone way past the point where anything any Gov says is credible or truthful - so if they reckon inflation is at 2,3,4%, double it and add a bit for luck.
Oi! I'm ATG and I don't think the inflation figures are fudged at all.Like Jon & ATG, i think ( know) the figures are fudged, whether its inflation or otherwise...I was half listening to something a cple of days ago which suggested that GDP has been tweaked (for Pharma) to include manufacturing done by a UK based company overseas.
Think we've gone way past the point where anything any Gov says is credible or truthful - so if they reckon inflation is at 2,3,4%, double it and add a bit for luck.
There is no one single correct measure of inflation. There are loads of different measures because they are intentionally trying to measure different things and they are used for different purposes.
Each person is going to experience inflation differently from everyone else, because we don't all buy the same stuff. The most obvious example is that some people pay rent, some pay mortgages and some pay neither. That makes a colossal difference to how your personal cost of living varies.
And not all prices in the economy react to interest rates the same way, so the Bank of England needs to use a measure of medium term, core economic inflation that doesn't mechanistically fly around every time you change the official rate.
Think what would happen if mortgage costs were included in the rate the BoE was trying to track. Each time they raise rates the cost of mortgages is increased by lenders. That would mean the inflation measure would mechanistically be increased too and the BoE would need to raise rates again, etc., etc.
The financial markets scrutinise the data produced by the UK's official sources in great detail. No one thinks the sources are bent.
Crumpet said:
The thing is, even if you get a 5% pay rise you re not seeing all of that. You could be seeing as little as a 2% rise after tax - not much use if your expenses have gone up 10%.
If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
It depends… if you’re not crossing a tax rate boundary then your take home does go up 5%…If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
Jon39 said:
You will have noticed that for a long time, UK governments use the Consumer Price Index for their main inflation communications, although they still like the Retail Price Index for some taxes they receive.
You know why. Increase benefits and pensions using CPI, but for taxes received it is RPI.
The records that I keep remain RPI.
By monitoring the previous 6 months, then multiplying by 2, that can provide an indication of the immediate future trend.
In January 2025, the 6 months (x2) = 2.2%. - - - - - 12 months = 3.6%.
Subsequent 6 month figures have been;
Feb = 2.1%
Mar = 3.4%
Apr = 5.9%
May = 6.1%
Jun = 6.3%
In July 2025 .......the 6 months (x2) = 7.4%. - - - - - 12 months = 4.8%.
I wonder how long this inflation increase will continue?
Is it the annual inflation rate that s published each month?
Or is a 6 month inflation rate published monthly also?
Don t forget there are repetitive seasonal variations in inflation, too.
If you are converting a rate for 6 months then you need (decimal rate+1)^2 - 1 to calculate the annual rate btw.
Edited by PlywoodPascal on Monday 15th September 08:27
Crumpet said:
The thing is, even if you get a 5% pay rise you re not seeing all of that. You could be seeing as little as a 2% rise after tax - not much use if your expenses have gone up 10%.
If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
Only if you calculate your net increase compared to your gross salary.If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
I don't think you need to be an economist. A simplified version is a prison where the inmates use matches for currency. Let's say 1 match gets a cigarette. 2 matches get a chocolate bar. 3 matches get you a phone call token etc.
If one inmate gets a box of matches from outside he will temporarily be rich but it won't actually increase the supply of cigarettes, chocolate bars or phone tokens. As it works through it will increase the price of those things in proportion to the increased supply of matches. Eg. If there were 100 matches and there are now 200 the price will double.
The Bank of England is that inmate. It can produce cash willy nilly but not goods.
It's inflation targeting has actually been flattered by huge deflation as consumer goods cost a fraction of what they used to in real terms - especially in relation to gold and property, but stay about the same in pounds. Gold or property prices provide a more realistic measure.
If one inmate gets a box of matches from outside he will temporarily be rich but it won't actually increase the supply of cigarettes, chocolate bars or phone tokens. As it works through it will increase the price of those things in proportion to the increased supply of matches. Eg. If there were 100 matches and there are now 200 the price will double.
The Bank of England is that inmate. It can produce cash willy nilly but not goods.
It's inflation targeting has actually been flattered by huge deflation as consumer goods cost a fraction of what they used to in real terms - especially in relation to gold and property, but stay about the same in pounds. Gold or property prices provide a more realistic measure.
PlywoodPascal said:
Jon39 said:
You will have noticed that for a long time, UK governments use the Consumer Price Index for their main inflation communications, although they still like the Retail Price Index for some taxes they receive.
You know why. Increase benefits and pensions using CPI, but for taxes received it is RPI.
The records that I keep remain RPI.
By monitoring the previous 6 months, then multiplying by 2, that can provide an indication of the immediate future trend.
In January 2025, the 6 months (x2) = 2.2%. - - - - - 12 months = 3.6%.
Subsequent 6 month figures have been;
Feb = 2.1%
Mar = 3.4%
Apr = 5.9%
May = 6.1%
Jun = 6.3%
In July 2025 .......the 6 months (x2) = 7.4%. - - - - - 12 months = 4.8%.
I wonder how long this inflation increase will continue?
Is it the annual inflation rate that ‘s published each month?
Or is a 6 month inflation rate published monthly also?
Don’t forget there are repetitive seasonal variations in inflation, too.
If you are converting a rate for 6 months then you need (decimal rate+1)^2 - 1 to calculate the annual rate btw.
As are ATG’s alarmist ones.
I am assuming he is full-on Prepper, with a hide in a woods stocked with bottle water, tins of food and a small supply of arms. Sounds like he is advocating crypto and gold for investments - total alarmist.
No doubt will retort with “let’s see in X years who’s right”. Well yes, let’s!
The world is indeed at a dodgy point - populist (some might say fascist) leaders taking the front pages whilst they actually feather their own nests. Full blame on immigrants, etc etc. Many claims that will be bulls
ttery made up bks,But….my view is rather more sanguine.
The orange emporer is being seen more widely for his lack of clothes (there’s an unpleasant view, eh
).Despite his attempts to foment violence, I do feel things will normalise..
FWIW, I also *personally* feel we are seeing the fall of the “American Empire”, but I suspect it will be more gradual than some may think.
I could, of course, be wrong. Maybe he will become America’s Dictator, & maybe Herr Farage will take his role on over here. I doubt it, but who knows.
ATG urging us to make decisions?
Well, mine is to continue to invest in a broadly global set of stocks - they seem to be still going okay, but the odd crash is perfectly normal in the cycle of investments.
PlywoodPascal said:
Crumpet said:
The thing is, even if you get a 5% pay rise you re not seeing all of that. You could be seeing as little as a 2% rise after tax - not much use if your expenses have gone up 10%.
If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
It depends if you re not crossing a tax rate boundary then your take home does go up 5% If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
As we all earn more these brackets get closer. They should really move up with inflation but they do not.
mikeiow said:
ATG urging us to make decisions?
Well, mine is to continue to invest in a broadly global set of stocks - they seem to be still going okay, but the odd crash is perfectly normal in the cycle of investments.
Good idea IF outside G7. RoW growing rapidly. G7 will continue to sheet the bed If You Ask Me.Well, mine is to continue to invest in a broadly global set of stocks - they seem to be still going okay, but the odd crash is perfectly normal in the cycle of investments.
PlywoodPascal said:
Crumpet said:
The thing is, even if you get a 5% pay rise you re not seeing all of that. You could be seeing as little as a 2% rise after tax - not much use if your expenses have gone up 10%.
If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
It depends if you re not crossing a tax rate boundary then your take home does go up 5% If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
For those interested in economics and inflation here are a couple of useful websites that provide a good amount of information for free.
This one is particularly useful aggregating a huge amount of global data. The UK specific page is here:
https://tradingeconomics.com/united-kingdom/indica...
For those more focused specifically on inflation I have always found this gives a realistic indicator of where inflation really is and where it is really going. The free version is slightly limited however it does give a headline indicator of "real" UK Inflation vs the official figures.
https://truflation.com/marketplace/uk-inflation-ra...
Whilst it is unfair to blame our current predicament on Rachel Reeves she certainly hasn't helped with inflationary and anti business policies. The BOE is also not helping currently by selling QE purchases directly into the Gilt market in competition with issuance rather than holding the bonds to maturity.
There is a lot to blame the Tories for but it was the financial crisis of 2008 that sowed the seeds for where we are today. That crisis triggered a global fear of deflation and a decade of zero interest rates which were held for far too long and the asset inflation that this generated. Covid and the money printing that followed were the black swan catalyst that triggered the horrendous mess we now find ourselves in. The tories were just unlucky to be in government at that particular juncture in history.
This one is particularly useful aggregating a huge amount of global data. The UK specific page is here:
https://tradingeconomics.com/united-kingdom/indica...
For those more focused specifically on inflation I have always found this gives a realistic indicator of where inflation really is and where it is really going. The free version is slightly limited however it does give a headline indicator of "real" UK Inflation vs the official figures.
https://truflation.com/marketplace/uk-inflation-ra...
Whilst it is unfair to blame our current predicament on Rachel Reeves she certainly hasn't helped with inflationary and anti business policies. The BOE is also not helping currently by selling QE purchases directly into the Gilt market in competition with issuance rather than holding the bonds to maturity.
There is a lot to blame the Tories for but it was the financial crisis of 2008 that sowed the seeds for where we are today. That crisis triggered a global fear of deflation and a decade of zero interest rates which were held for far too long and the asset inflation that this generated. Covid and the money printing that followed were the black swan catalyst that triggered the horrendous mess we now find ourselves in. The tories were just unlucky to be in government at that particular juncture in history.
Edited by Hedgedhog on Monday 15th September 12:26
PlywoodPascal said:
Jon39 said:
You will have noticed that for a long time, UK governments use the Consumer Price Index for their main inflation communications, although they still like the Retail Price Index for some taxes they receive.
You know why. Increase benefits and pensions using CPI, but for taxes received it is RPI.
The records that I keep remain RPI.
By monitoring the previous 6 months, then multiplying by 2, that can provide an indication of the immediate future trend.
In January 2025, the 6 months (x2) = 2.2%. - - - - - 12 months = 3.6%.
Subsequent 6 month figures have been;
Feb = 2.1%
Mar = 3.4%
Apr = 5.9%
May = 6.1%
Jun = 6.3%
In July 2025 .......the 6 months (x2) = 7.4%. - - - - - 12 months = 4.8%.
I wonder how long this inflation increase will continue?
What is the figure you are multiplying by 2 and why are you multiplying it by two?
Is it the annual inflation rate that s published each month?
Or is a 6 month inflation rate published monthly also?
Don t forget there are repetitive seasonal variations in inflation, too.
If you are converting a rate for 6 months then you need (decimal rate+1)^2 - 1 to calculate the annual rate btw.
Hello PP.
Just in case you are a mathematician, I had better start by saying that my method might not be entirely mathematically correct, but on many occasions it has certainly provided a clue to the future direction of inflation.
Using the monthly Retail Price Index figures. The actual figures, not the 12 month CPI percentages that are publicised.
Latest month number, minus the 6 month back number, divided by the 6 months back number, then times 100.
That gives the percentage change over the previous 6 months.
I then multiply that by 2 to make it annualised.
When inflation is beginning to head up or down, the past 6 months will give a more up to date picture than the past 12 months.
You can run a chart of those two figures, which can be a good trend indicator at times, as one line crosses over the other line.
One funny thing when inflation figures are announced (especially by the 'experts' at the BBC) are the reasons for increase or decrease.
They might say the increase is due to food prices or fuel prices. Take a look at the months figure being dropped out of the 12 month window. Sometimes that month is a tiny percentage compared to perhaps a slightly bigger increase in the latest month. So it is not what they say, but more due to the particular figure that has been dropped out of the 12 month calculation.
Edited by Jon39 on Monday 15th September 11:54
@ ATG, apols for linking you to my comment about fudging the figures (one think that is useless on PH when typing a message is the ability to scroll back to see who said what)
personally i consider the figures fudged in that over the years the basket of goods changes, and i defo think that they're playing with the way they're reporting other stuff. That aside, i think things are changing and changing relatively fast.......
US won't necessarily hold its reserve status. All countries debase/print like crazy and then go thru periods of QT, so we're yoyo'ing between QE/QT, whilst (currently) the Govs struggle to sell their worthless 'paper'.
For me, yeps, BTC is a strong part of my 'non fiat' hedge.
Everyday inflation impact is hard to measure for consumers, as conviently producers have got cute with packaging sizes, and the generation who knew exactly how much a pound/kilo of mince/potatoes etc should cost have gone.
personally i consider the figures fudged in that over the years the basket of goods changes, and i defo think that they're playing with the way they're reporting other stuff. That aside, i think things are changing and changing relatively fast.......
US won't necessarily hold its reserve status. All countries debase/print like crazy and then go thru periods of QT, so we're yoyo'ing between QE/QT, whilst (currently) the Govs struggle to sell their worthless 'paper'.
For me, yeps, BTC is a strong part of my 'non fiat' hedge.
Everyday inflation impact is hard to measure for consumers, as conviently producers have got cute with packaging sizes, and the generation who knew exactly how much a pound/kilo of mince/potatoes etc should cost have gone.
mikeiow said:
... Well, mine is to continue to invest in a broadly global set of stocks - they seem to be still going okay, but the odd crash is perfectly normal in the cycle of investments.
I agree entirely Mike, and history proves us to be correct.
During the height of the pandemic, I did wonder though, whether the end of business and capitalism might be about to happen, but decided to risk increasing holdings at the lower prices. Fortunately clever scientists (many British) developed vaccines which seemed to help normality return. If the end had come, I suppose buying more stocks would not have made any difference. We would all have been ruined anyway.
There is another aspect regarding shareholding and inflation.
Businesses in some sectors are able to increase their prices, without sales declining. Non cyclical essentials.
Discretionary purchase businesses are in a more difficult situation during high inflation. If they cannot increase prices and obviously it is their profitability that suffers.
mikeiow said:
FWIW, I also *personally* feel we are seeing the fall of the American Empire , but I suspect it will be more gradual than some may think.
I could, of course, be wrong. Maybe he will become America s Dictator, & maybe Herr Farage will take his role on over here. I doubt it, but who knows.
ATG urging us to make decisions?
Well, mine is to continue to invest in a broadly global set of stocks - they seem to be still going okay, but the odd crash is perfectly normal in the cycle of investments.
Investing in assets be it stocks or Gold etc, or even buying years of your favourite tipple now (mild prepping!) could all pay off or help to preserve your wealth. It will be interesting to see if things like premium bonds suffer net reduction either for spending or alternative assets, a rush of money out of savings to 'spend' could accelerate inflation or just asset inflation depending the choices by individuals, and businesses have no choice but to either trim margins or increase prices if their input costs increase. I could, of course, be wrong. Maybe he will become America s Dictator, & maybe Herr Farage will take his role on over here. I doubt it, but who knows.
ATG urging us to make decisions?
Well, mine is to continue to invest in a broadly global set of stocks - they seem to be still going okay, but the odd crash is perfectly normal in the cycle of investments.
What's is more harsh is for those more hand to mouth the, rent, the food, the bills, those with no/few appreciating assets and there are more of them and they can't even enact a plan they may work like you or I try to. These folk are more likely to buy into the media narratives rather then the debt/economic ones.
It's seemingly all about appearances/confidence right now, any attempt to slow debt has immediate negative effects to services for the population, the resulting increase in debt to GDP seems to be preferable but projecting this out long term it becomes unsustainable, but many countries are in the same boat.
Businessess, jobs are protected to ensure stability, I think the banks being too big to fail has moved to large businesses beign the same, JLR group and the current cyber issue?
If we can keep employment up/stable and 'support' everything that looks especially wobbly then the status quo can be maintained, 'just' with more debt.
The trouble is what does ever increasing debt to gdp lead to as it's reduction seems impossible in current conditions with the current choices, is it just the best of our poor options. Japan still doing ok with their very high one.
Crumpet said:
If you told me inflation was running at 15-20% I would believe you. It feels like it, particularly for food.
Food inflation is currently running at 5%. Been that way for the last couple of months after rising for the past 9 months. That's real, like for like for like prices on tens of thousands of grocery items. It's what I do for a living
New figures will be out tomorrow - let's see if they drift further upwards
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