Tuesday, Nov 27, 2007
Inflation to peak in early 2008
Safe Haven: UK Inflation Forecast 2008 (RPI and CPI)
"The anticipated trend in Money supply growth continues to moderate from the high levels of 14% plus towards a trend to below 10% as per the analysis of 18th Sept 07. Money supply is an important contributory indicator for future inflation between 6 and 12 months forward. Hence money supply growth near 14% during mid 2007 was expected to result in higher inflation in the immediate future going into 2008 (22nd August 07). "
Posted by sold 2 rent 1 @ 06:19 AM (1225 views) Add Comment
9 Comments
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1. planning4acrash said...
Exactamundo, and we should be tightening base rates in anticipation. Its like 2005 again keeping base rates so low! 2005 wasn't a one off, we've been too low ever since.
2. dohousescrashinthewoods said...
Interesting thought, though, if growth in the money supply is slowing, does that mean we have early signs of deflation?
Anything that grows at 10-15% a year is out of control (e.g. house prices past..)
So our money supply (read inflation) has been out of control for how long now? Economic schmability.
3. rickyb said...
I'm not so sure that CPI and RPI inflation will settle down as rapidly as this article suggests. The effects of money supply growth are often only seen more than 3 years later.
4. little professor said...
You missed out the actual predictions in your article summary:
5. Still Waiting said...
Is it not a little optimistic to think you can predict future interest rates based on domestic inflation only? What about imported inflation?!
6. disillusioned said...
Well said little professor. As I read this article, I also thought that this meant a lowering of the base rate. Hence my post.
7. sold 2 rent 1 said...
Yes. The article is about inflation falling sharply next year.
The problem is money supply and inflation have a strange relationship that doesn't always work like it should.
In the US now we have money supply growing sharply and going into oversease assets as the USD carry trade picks up pace.
8. happyrenterz said...
I don't agree with this forecast. He is basing his inflation forecast on the money supply and a strong pound. But what about the price of oil and food which has nothing to do with the UK economy? To be honest I don't understand this money supply well enough but a lot of people are forecasting a big fall in the value of the pound as opposed to this guy. With financials on the brink of bankruptcy, the debt IOU trade closed and falling house prices what is going to keep the UK strong while the USA goes into recession? When the BoE drops rates the pound will head down just like the dollar. So his advice to put money in saving accounts seems pretty pointless to me, better buy gold or commodity ETFs which offer some protection from a falling pound.
9. inbreda said...
I'm with you happyrenterz. I have sold the GBP against the swiss franc and singapore dollar in anticipation.