Tuesday, Aug 12, 2008
RPI 5pc - CPI 4.4pc
The Telegraph: CPI Inflation surges to 4.4pc as squeeze on consumers grows
CPI Inflation hit 4.4pc in July, more than double the Bank of England's target, as the rising price of food and fuel continued to eat away at Britons' consumers. CPI inflation now expected to hit 5pc before the end of the year
Posted by sold 2 rent 1 @ 09:56 AM (1412 views) Add Comment
12 Comments
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1. paul said...
Well, they're being caught napping by not raising rates now ...
2. sold 2 rent 1 said...
This is the false inflation spike before deflation sets in around 2010-2011
Japan had the same in the early 1990s
Whilst the bank bailouts will continue and our currency is devalued, we may experience more rising prices of essential goods, but as unemployment soars wages will be kept down stopping a wage-price spiral..
The end result is we are all going to feel extremely poor
3. jack c said...
Economist Michael Saunders at Citigroup - "Going forward, our base case is for unchanged rates to year end, but if the MPC do anything in the next month or two then a hike seems far more likely than a cut."
4. paul said...
"if the MPC do anything in the next month or two then a hike seems far more likely than a cut."
This is simply expectation setting - the BoE is hoping that by threatening to raise rates they will preclude having to do so.
This might have worked if their inflation measures had any credibility left.
5. mountain goat said...
inflation is here to stay, if it eases even a tiny bit the BoE will cut rates to try help the economy/housing. The BoE has a lot of room to cut from 5% down to 2% or lower. This means GBP heads for 1.50 against the USD or lower and brings more inflation because all imports get more expensive.
6. sold 2 rent 1 said...
mountain goat,
Japan had near zero IRs but they could not escape deflation in the end.
When the money supply collapses so will prices of goods
7. mountain goat said...
S2R you may be right that in the long run deflation might happen. But first we get IR down to 2% and GBP turned into monopoly money.
8. sold 2 rent 1 said...
Martin Armstrong's turning point on 22 March tied in with US IRs (10 year T-bills yield) hiting a low at 3.3pc
See graph
http://finance.yahoo.com/q/bc?s=%5ETNX&t=6m&l=on&z=l&q=l&c=
He has another turning point in April 2009.
What will this be in? Who knows?
After that, it is a death plunge in confidence to the summer of 2011.
This comes just before the final "fifth night" destruction period (late summer / early autumn) and the end of Calleman's model on 28 Oct 2011
9. sold 2 rent 1 said...
Look how significant the 22 March 2008 turning point was
See graph
http://finance.yahoo.com/echarts?s=%5ETNX#chart1:symbol=^tnx;range=my;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
The low in US IRs in March completed a secular trend lasting since 1981 when IR were 15pc
So it looks like US IRs are heading higher into 2011.
This is surely telling us that a US bond market collapse will send US IRs rocketing sometime over the next 2-3 years
10. mountain goat said...
S2R thanks for chart. So you think that is the bottom for TNX?
Wouldn't that be something if Bernanke now started raising rates!
What are your views on this recent $ strength, just a blip or response to the March turning point?
11. sold 2 rent 1 said...
mountain goat,
The TNX is decided by the market, not some idiot in charge.
The USD index rise has everything to do with the EUR fall.
22 March also marked a low for the USD index.
Maybe this is saying the EUR will collapse before the USD, either way get out of both as the long term prospects are rubbish.
The USD may carry on rising against the EUR, but carry on falling against gold
12. Timbo said...
Agree this is a false inflation spike. I think the MPC is right to sit on their hands for now, but if GBP gets below 1.75 again we should expect hikes based on imported inflation. Let's see if tomorrow's U.S. CPI is as grim!
http://www.newspools.com/markets/what_will_the_consumer_price_index_be_reported_14_aug_08.html