Tuesday, Jul 17, 2007
6% is on its way. There will be no where left to run
Telegraph: Sterling hits new high on inflation rise
"The steady upward momentum in core inflation will be the key driver of overall inflation. We expect this to drag inflation back up towards 2.5pc year-on-year by the end of the year."
Economists said the news was likely to push the Bank of England to raise rates to 6pc before the end of the year.
Posted by sovietuk @ 12:40 PM (174 views) Add Comment
20 Comments
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1. Dbnazz1 said...
fasten your seat belts, we are heading straight into the storm. so much for the end to boom and bust. Personally i think bust is exactly where we are heading.
2. shipbuilder said...
What a surprise, we were right all along - how come we failed to see the benign economic conditions supporting the housing market when all the 'experts' did? This blog has been consistently pointing out the upwards inlation pressures for over a year now - rising inflation, rising rates and a slowing market - all the ingredients for a 'flattening' right enough. Month after month the 'doomsayers' predicted the slow growth of inflation in the face of insufficient rate rises. The 'doomsayers' also predicted the inflation now built in to the economy. The 'experts' revised their interest rate peak upwards and upwards...... reassured that the mythical cut would happen again when things got tight. Oh dear.... it would truly take a fool to predict a rosy market now in the face of predictions from the CML no less.....
Expect the housing cheerleaders to follow the US line - we knew this was coming, it's not a crash, just a correction that will last a few months etc.etc.
3. dohousescrashinthewoods said...
If I read you right, Shipbuilder, you are implying the US line of "it's not a crash, just a correction that will last a few months" continued for a few monts until nobody believed them and they started admitting it may be "a little longer". Meanwhile most people with at least a pair of braincells not sudued by the telly can see the down will need to mrror the up before this shakes out.
And it's been one heck of an up (http://youtube.com/watch?v=kUldGc06S3U - seen before, but worth another look :) )
4. denzil said...
No this is just not true I tell you. Inflation has nothing to do with the economy.
The man from the Landlord association said the governement will probably cut rates to help FTB's.
5. george monsoon said...
Denzil.. tsk tsk....
but very funny. Have you visited his webS(h)ITE
6. Orwell said...
I always thought it would be 6.5% by the end of ther year and 7.5% by this time next. Then I read 'Fantasy Island'....
7. Ihopeitgoeswithabang said...
That webS(h)ITE
News Section! Propaganda at its best or worst depending on your take!
He has the cheek to come on here and try to state he has a balanced view.
Bahhhh!
8. Cheekie Charlie said...
"The Office for National Statistics said core inflation -which excludes energy, food, alcohol and tobacco - climbed to 2pc in June, its highest level since March 1997.
Retail price inflation rose unexpectedly to 4.4pc, up from 4.3pc in May, as more expensive mortgages pushed household costs higher."
Sorry Merv 5.75% no good! higher, higher, much higher until you hear a crunch sound.
9. planning4acrash said...
I'm just waiting for the 'softer landing' and the 'property crunch' or possibly 'snap crackle and pop' !!
10. sold 2 rent 1 said...
GBP/YEN at 250
http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/currency/11/14/default.stm
How long before the carry peak?
11. dbnazz1 said...
The man from the Landlord Association has been notable by his absence today. Perhaps he has been on the phone to the samaritans.
He got a bit of a verbal kicking yesterday, but that was his own fault for talking out of his #rse!
A lot of people out there are still taking the line that there won't be a crash without an external economic shock, like in the early nineties. Well in the early nineties there was the economic shock of a big jump in interest rates. This time it is going to be general inflation with the subsequent rise in inetest rates. But with people having borrowed so much, inflation and interest rates won't have to move much at all to give the same impact as an economic shock. RICS previously said that it would only take 6% base rate to cause a crash, and we are almost there!
12. deepak said...
Lets add some more facts. Crude oil went down to $55 a barrel in the begining of the year its now back to $77 a barrel.
Oil has a major role in inflation figures as other products derived from oil, like diesel and petrol are essential to the economy. and the demand is fairly inelastic (ie change of price does not effect the demand).
This also leads to hike in price in other areas as you need to transport good and people. (higher inflation)
Also to add that other commodities are also at a all time high.
The fall of price from last year, has been seen in the inflation figures and these rises will be felt in months to come as higher inflation.
Guess where then are the interest rates going?
Smart boy, you guessed it right UP
13. planning4acrash said...
Deepak, add to that, most fertilisers and insecticides, etc. are oil based and heaps of oil is used in mechanised farming. Plus, the additional demand for bio-fuels with higher oil prices puts a squeeze on food crops. The result is, that food prices will go north and this will kick in fully a yr or two after the oil price rise. So, you get the short term effect on petrol and longer term effect on food and other consumables. A short term rise in oil will be buffered by manufacturers and food producers in their margins, because they will see it as a short term thing. The question about petrol is answered, that impacts straight away, the question about other things, is whether oil stays high for a year or so or goes even higher and if those who sell us goods and food realise that they have to raise prices and cannot (eat) any further into their margins.
14. enuii said...
Its a good job oil is priced in dollars ;-) so as to temporarily mask the effects £/$ up to 2.045 today. The current gov't has had the cushiest of rides for the last 10 years and I can't believe that this run of sheer luck has run out yet into a crash and burn scenario.
15. paul said...
It's all going pear shaped as we all predicted.
Something else that David Smith got wrong! He's just plain wrong but on a philosophical note, is it better to be reliably wrong, or unreliably right?
16. nearly30 said...
Any thoughts on the Liquidity Trap and whether we are seeing any effects from an avoidance strategy or is it just a classic bubble problem:
From (wiki):
"In normal times, the monetary authority (usually a central bank or finance ministry) can stimulate the economy by lowering interest rate targets or increasing the monetary base. Either action should increase borrowing and lending, consumption, and fixed investment. When the relevant interest rate is already at or near zero, the monetary authority cannot lower it to stimulate the economy. The monetary authority can increase the overall quantity of money available to the economy, but traditional monetary policy tools do not inject new money directly into the economy. Rather, the new liquidity created must be injected into the real economy by way of financial intermediaries such as banks. In a liquidity trap environment, banks are unwilling to lend, so the central bank's newly-created liquidity is trapped behind unwilling lenders."
17. nearly30 said...
Not just UK - I meant to add - is this a global issue and as such will result in a global hangover too?
18. denzil said...
Actually I quite like this strong £. The amount of stuff I'm now ordering from the US instead of the UK is saving me a fortune.
I was about to order a couple of hundred quids worth of books from an online UK supplier but after your throw the strong pound into the mix I got the same goods for about half the price.
It also struck me as amazing that I can buy new from the US and sell second-hand on Amazon.co.uk at a profit. Crazy!
19. enuii said...
Denzil, that's not crazy it's called a small business!
20. Robh said...
Do you have to pay import duty or VAT?
I guess the books are VAT free