Friday, Nov 30, 2007
Inflation Up
Bloomberg: Europe's Inflation Rate Soars, Putting ECB in a Bind
European inflation accelerated in November to the fastest in more than six years, adding pressure on the European Central Bank to raise interest rates even as economic expansion cools. The inflation rate in the 13-nation euro area rose to 3 percent this month from 2.6 percent in October.
Posted by alan @ 10:44 AM (962 views) Add Comment
15 Comments
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1. speculatorone said...
When is our next inflation report out?
2. dohousescrashinthewoods said...
Next week or so
3. sovietuk said...
Messy, no room for rate cuts, infact quite the opposite. Unfortunately the overall stability of economies has to come before the carnage inflicted on certain unfortunate groups. Sadly as well as the greedy idiots getting burnt (a good thing) it will also be the innocent who get steam rollered as well. Life.
4. george monsoon said...
Why are the MPC loathe to raise interest rates to combat inflation?
I notice that there is talk of making a rate cut next month, albeit Blanchflower taking his ministry dictated approach as ever.
Surely if we do not raise rates, then inflation will soar?
Oh dear..!!!
Can someone explain why the bank is considering lowering rates?
5. tyrellcorporation said...
George, the mantra is: Protect House Prices At All Costs.
You'll hear Mervyn say his remit is to target inflation but this goes out of the window if the engine of the whole of UK PLC (House Price Inflation) starts to wobble. The next few weeks will be very interesting. My gut feeling is that his statement about things getting 'uncomfortable for the economy' means that they will hold rates in December, thus squeezing home owners and the indebted.
6. rickyb said...
With CPI inflation in the UK likely to be above the 2% target for at least the next 12 months, it seems unlikely that the BofE could possibly cut interest rates when their remit is to maintain the CPI inflation rate at around 2%. However they will probably try to argue that they are looking at the long term, but if this were the case, then they should have raised interest rates 4 years ago when it was obvious that money supply was starting to inflate too rapidly.
7. confused76 said...
George is 100% right
the one central banker that got it right was this fellow:
http://en.wikipedia.org/wiki/Paul_Volcker
Alan Greenspan, his pupil, put up a far less memorable performance, but due to intense media coverage he is better known to the public
Mervyn,
if you are on this blog (and I know you and Katie Barker are)... keep up with the good work and do not let a lame duck PM intimidate you
8. confused76 said...
Let me tell you
Mervyn's memoirs (published after he is fired in 2008) will be an absolute best seller
9. Submedia said...
interest rates must be held to purge the excess out
10. Guiriduro said...
Well, the way inflation is measured is meaningless and massaged to hell - it largely excluded house price inflation directly by only including the leveraged position - mortgage payments - which were only slightly rising as competitive credit markets and a low interest rates lowered the overall position. It had the intended consequence that banks could pump enormous amounts of money into the system, creating a debt economy, while the inflation it caused (in house prices) was leveraged out of the statistic. But Oh! how its going to bite as it goes bad...
See, with the credit crunch and tighter lending conditions, mortgages are going to go up anyway, at a slow but increasing rate (not forgetting oil, food price increases which are on the way up, too.) The RPI measure is going to go north pretty quickly. The bum deal is, the Bank of England's response to inflation (too much money in the economy pushing prices up) is to increase the interest rate to curb spending and increase saving. Ahh... but in the short to medium term that means actually adding to inflation (as defined by the absurd RPI measure) because mortgages will be going up even more (there is a danger of 10%+ interest rates if RPI inflation heads toward 5-6%). Of course, house prices will be doing what they should - crashing down - so I expect finally the miserable politicians will make the RPI measure actually view house prices and not mortgage payments, that they've been conveniently avoiding doing for the last 10 years while its been obvious that they were massively inflating.
11. drewster said...
Time for a little history lesson. In 1973-4, the price of oil quadrupled (as it has almost done over 2003-7). The central banks slashed interest rates, deciding that it was more important to sustain growth than contain inflation. Despite the rate cuts, growth stalled and inflation rose. Inflation rose to double-digits, peaking at 13.5% in 1981. Paul Volcker (the new chairman of the Federal Reserve) increased interest rates dramatically. Everybody hated him to the point where farmers drove their tractors to Washington DC in protest. However the medicine worked and by 1983 inflation was down to 3.2%. There then followed the Roaring '80s.
So we might be in for a repeat of the mid-1970s. Or the 1930s. Place your bets.
12. confused76 said...
http://news.bbc.co.uk/1/hi/business/7120460.stm
this is a fine mess, but cutting rates is not the answer
Mervyn, you know what to do
(A: nothing at all, maybe try postponing next week meeting. just find an excuse)
13. planning4acrash said...
Confused, I'll defo buy em, will be a hoot, by then the cat will be out of the bag and he will be motivated to cover himself. Of course, there is a price to everything, even silence and loss of face, maybe that's why he's kept his job so long!!
14. enuii said...
Remember David Kelly, look what happened to him when he crossed NeoLiebor, perhaps Mervyn wants to manage to retire, I suspect that he will quietly be replaced without fanfare by someone more 'aligned' to the NeoLiebor cause and will never actually get around to writing his memoirs.
15. Stevie Dee said...
Yes inflation is up.. it is a man who faces or a coward who retreats.. the secondary element is favourite with this quango (mpc).. as with all these liars.. the time is coming when whatever they try to do, nothing they do or say will make a jot of difference. Yes the masses will pay too for believing in brokers fit for only the bookmaker's on the high street, and fraudelant self-interested governance. What a shambles. But the outcome in years to come, will surely be a positive one.
In short, what will happen shortly, will be the equivalent of learning from the holocaust or Nazism.