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Sledgehead

Bank Of England Inflation Report

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The latest BoE Inflation Report has just been issued explaining their thinking on rate setting, so read it at the link!

From the report (colour coded, red=inflationary, blue=disinflationary):

Costs and prices

Consistent with the loss of momentum in activity, total hours

worked fell in the three months to May and claimant-count

unemployment edged higher. Reports from the Bank’s regional

Agents point to a further easing in employment growth.

Settlements in the private sector edged up, but regular pay

growth eased. Unit labour cost growth picked up on the back of

decelerating productivity, but only to around recent averages.

Other cost pressures were mixed. Manufacturers’ input price

inflation rose, reflecting higher fuel prices, but output price

inflation eased from its recent high levels. The available

indicators for services output prices, though mixed, on balance

point to little change in inflationary pressures in that sector.

The prices of imported consumer goods have stopped falling.

CPI inflation edged up to 2.0% in June. The pickup in CPI

inflation since last year is likely to reflect both the direct and

indirect impacts of higher oil prices as well as the pressure of

demand on supply in the first half of last year.

I guess he's saying that as long as we pay ourselves less in a world of higher oil prices, raw materials and consumer goods, inflation will remain subdued and interst rates can be held.

Any landlord care to extract a crumb of comfort from that?

Edited by Sledgehead

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The Western economies are staring into the mouth of an abyss. That mouth is the mouth of the Asian tiger economies. Sooner or later they will place less and less value on our money - by buying less and less US government debt.

IRs will have to rise - regardless of the wheels falling off the economy at home.

The BOE are effectively saying 'Don't make any sudden movements and maybe, just maybe, we won't be eaten.'

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Other cost pressures were mixed. Manufacturers’ input price

inflation rose, reflecting higher fuel prices, but output price

inflation eased from its recent high levels.

This is now out of date, factory output prices jumped to 3% from 2.5%, BIG inflationary pressure!

The prices of imported consumer goods have stopped falling

very interesting indeed. It is the price of imported goods from China etc that has kept inflation so low. This had to stop eventually, now the real increase in costs will no longer be able to be hidden.

High Inflation - coming to a town near you!

Edited by munimula

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The latest BoE Inflation Report has just been issued explaining their thinking on rate setting, so read it at the link!

From the report (colour coded, red=inflationary, blue=disinflationary):

Costs and prices

Consistent with the loss of momentum in activity, total hours

worked fell in the three months to May and claimant-count

unemployment edged higher. Reports from the Bank’s regional

Agents point to a further easing in employment growth.

Settlements in the private sector edged up, but regular pay

growth eased. Unit labour cost growth picked up on the back of

decelerating productivity, but only to around recent averages.

Other cost pressures were mixed. Manufacturers’ input price

inflation rose, reflecting higher fuel prices, but output price

inflation eased from its recent high levels. The available

indicators for services output prices, though mixed, on balance

point to little change in inflationary pressures in that sector.

The prices of imported consumer goods have stopped falling.

CPI inflation edged up to 2.0% in June. The pickup in CPI

inflation since last year is likely to reflect both the direct and

indirect impacts of higher oil prices as well as the pressure of

demand on supply in the first half of last year.

I guess he's saying that as long as we pay ourselves less in a world of higher oil prices, raw materials and consumer goods, inflation will remain subdued and interst rates can be held.

Any landlord care to extract a crumb of comfort from that?

Ever stopped to wonder why rates are now falling in the UK? Do you really believe it has anythg to do with inflation? Interest rates will and are being used to maintain confidence in the housing market by promoting higher prices.

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The Western economies are staring into the mouth of an abyss. That mouth is the mouth of the Asian tiger economies. Sooner or later they will place less and less value on our money - by buying less and less US government debt.

IRs will have to rise - regardless of the wheels falling off the economy at home.

The BOE are effectively saying 'Don't make any sudden movements and maybe, just maybe, we won't be eaten.'

Marina - gorgeous image; Great bit of descriptive writing. Funny how a visual image makes things seem so much clearer. Actually I'm paraphrasing Jesus and his comments on parables.

"Don't make any sudden moves and maybe, just maybe we won't be eaten." Excellent.

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Other cost pressures were mixed. Manufacturers’ input price

inflation rose, reflecting higher fuel prices, but output price

inflation eased from its recent high levels.

http://news.bbc.co.uk/1/hi/business/4130964.stm

Prices of goods leaving UK factory gates rose 0.7% in July, the ONS said.

This brought the annual rate of factory gate inflation to 3.0%, up from 2.5% in June and above the 2.4% predicted by experts.

'Worrying jump'

The 3% figure is also higher than the Bank of England's 2.0% target, but the Bank has said it expects rising oil prices to drive up inflation in the short term.

However, Howard Archer, an economist at Global Insight, said it was "a worryingly larger jump than expected in producer prices".

He said it raised concerns manufacturers were finding it increasingly difficult to absorb higher input costs, "and that these are consequently starting to increasingly feed through the supply chain".

With oil prices rising to new highs in early August, there was evidence of an increase in underlying inflationary pressures, Mr Archer said.

He added that this made it unlikely the Bank of England would cut interest rates again in the near future.

The BoE is a joke

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Dum Scum Bleader,

you are wrong, understand nothing, and seem happy to continually demonstrate that fact on this board.

Unless you can post something sensible, dont bother posting at all, numpty.

CIUW, I agree. Anyone wanting us to believe that inflation does not affect interest rates should be sectioned.

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Interestingly from the Blog:

BoE to lower growth outlook as consumers flag (Reuters)

But according to the report:

The outlook for GDP growth

The profile is weaker in the near term than in the May Report, but stronger further out.

I have put the fan charts for growth projection from May and August together in the thumbnail below. Judge for yourself what they are thinking:

UK_BoE_GDP_projections.JPG

post-141-1123669995_thumb.jpg

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Guest Bart of Darkness

Perhaps if we had bingo and comic strips nocluesunreader would feel more at home?

Try reading The Economist mate (though be warned, the only tits you will see are Tony and Gordon).

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Dum Scum Bleader,

you are wrong, understand nothing, and seem happy to continually demonstrate that fact on this board.

Unless you can post something sensible, dont bother posting at all, numpty.

Oh dear I seem to have posted something that disagrees with the gospel according to HPC junkies. You really would be happier in a totalitarian state (not only could you stop anyone disagreeing with you but you could control house prices as well!!). Perhaps instead of reacting in your predicatbly hysterical way you would prefer to point out other reasons why, at a time when there are risks to inflation, the BOE decides to lower interest rates (assuming you continue to deny it has anything to do with the maintaining housing market).

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This is now out of date, factory output prices jumped to 3% from 2.5%, BIG inflationary pressure!

indeed, thanks for adding that. Their words not mine.

The price of imported goods has stopped falling.

very interesting indeed. It is the price of imported goods from China etc that has kept inflation so low.

You didn't comment on the position of this BoE statement: right at the end of the paragraph and so throw-away! I would have thought it could have started a paragraph of its very own!

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Well lets see what the inflation stats say on the 16th, personally I expect to see rise (as does the BoE) but who knows how big it'll be. If it does go up it is will be hard to defend the current rate cut and will probably put the brakes on any decrease in IRs that some in the MPC might want (particularly as there's been no decrease in crude prices for September, that's the stuff that's hit $64 a barrel).

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CIUW, I agree. Anyone wanting us to believe that inflation does not affect interest rates should be sectioned.

I did not say that inflation is not controlled by interest rates merely that the BOE sees confidence in the housing market as more important than keeping inflation under control. Perhaps if you read the posing next time instead you would understand what was being said.

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Well lets see what the inflation stats say on the 16th, personally I expect to see rise (as does the BoE) but who knows how big it'll be.  If it does go up it is will be hard to defend the current rate cut and will probably put the brakes on any decrease in IRs that some in the MPC might want (particularly as there's been no decrease in crude prices for September, that's the stuff that's hit $64 a barrel).

If imported good prices have stopped falling, petrol is hitting over 90p a litre and factory output inflation is upto 3% then we could even be looking at more than a 0.1% rise in inflation figure and that should grab the headlines. The only downward pressure this month was a small cut in mortgage costs - but they aren't included in CPI anymore :lol:

Edited by munimula

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Well lets see what the inflation stats say on the 16th, personally I expect to see rise (as does the BoE) but who knows how big it'll be.  If it does go up it is will be hard to defend the current rate cut and will probably put the brakes on any decrease in IRs that some in the MPC might want (particularly as there's been no decrease in crude prices for September, that's the stuff that's hit $64 a barrel).

So when inflation goes up and rates stay the same and then go down again in Oct/Nov perhaps you will begin to understand that the housing market is the number 1 priority as far as the BOE is concerned.

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If imported good prices have stopped falling, petrol is hitting over 90p a litre and factory output inflation is upto 3% then we could even be looking at more than a 0.1% rise in inflation figure and that should grab the headlines. The only downward pressure this month was a small cut in mortgage costs - but they aren't included in CPI anymore  :lol:

Wonder if mortage repayments will magically appear in the CPI figures :D;)

Then disappear when IRs start going up.

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Ever stopped to wonder why rates are now falling in the UK? Do you really believe it has anythg to do with inflation? Interest rates will and are being used to maintain confidence in the housing market by promoting higher prices.

Dear adumdailysportreader:

Shame it failed to work for shares post 2000 eh? Guess what? All that liquidity ended up in a RECOVERING asset class: property.

Now: take a look at how shares have been responding of late. It's almost impossible to contain those 0.5% daily rises over the past fortnight. The index of leading shares is up 12% in ~2 months and is +63% over 2.5 years. Add in dividends and the ability to SIPP those gains (did nobody tell you a SIPP isn't just for property? Ha!) and it looks pretty damned attractive.

The question is, where will any extra liquidity go: stagnant housing or spriralling equities?

Alternatively you could anticipate a credit crunch, which would be good for neither asset class. The point is, housing is SOOOOOOOOOOOOOO last year.

Edited by Sledgehead

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BOE sees confidence in the housing market as more important than keeping inflation under control.

If that is true, then why did the BoE allow HPI to runaway at unsustainable growth a few years ago and refuse to increase interest rates to keep it under control?

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Oh dear I seem to have posted something that disagrees with the gospel according to HPC junkies. You really would be happier in a totalitarian state (not only could you stop anyone disagreeing with you but you could control house prices as well!!). Perhaps instead of reacting in your predicatbly hysterical way you would prefer to point out other reasons why, at a time when there are risks to inflation, the BOE decides to lower interest rates (assuming you continue to deny it has anything to do with the maintaining  housing market).

Mervyn King the chairman of the BoE his words

"House prices are a matter of opinion debt is for real"

Do you really think that the BoE is so blinkered to focus on house prices only? Do you not think that the global economy impacts the UK in any way?I really can,t believe you are that naive! As I have urged you in a previous thread check your history goverments and financial institutions do not and will not protect markets......... that be stock markets or housing markets!

Get real we live in a capitialist country market correction is a healthy way and the only way of controlling market bubbles and the current housing market is one hell of a bubble.

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Ever stopped to wonder why rates are now falling in the UK? Do you really believe it has anythg to do with inflation? Interest rates will and are being used to maintain confidence in the housing market by promoting higher prices.

If the BoE cares at all about asset prices (such as housing) it is only because they know that they have an effect on demand growth. They realise there is not only a connection between house prices and spending, but also equity prices and spending. Read the inflation report:

Demand in the United Kingdom

Equity prices rose substantially. If sustained, these asset price movements would together impart a significant impetus to demand growth in the medium term.

...

The outlook for GDP growth

In the central projection, output growth remains subdued in the near term, reflecting the continued sluggishness of domestic demand. Output growth then picks up as the impetus from recent movements in asset prices works through to consumption, investment and net trade.

Let me spell that out for you: growth was hit rather too hard by property stagnation, but they are looking to equities to take up the slack, NOT property.

The chart of central projection shows how they hope things will develop. The red above reveals how they believe this picture will be painted. That is BY MAINTAINING A RISE IN EQUITIES. Read it afgain, the clues are all there! Subdued demand near term as property stagnates, increased demand further out as equities continue to rise.

In short they don't give a toss about your old property collection. Put it in a box and hawk it at a car boot for all they care. They are looking to equity investors to take up the slack.

Edited by Sledgehead

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Mervyn King the chairman of the BoE his words

"House prices are a matter of opinion debt is for real"

Do you really think that the BoE is so blinkered to focus on house prices only? Do you not think that the global economy impacts the UK in any way?I really can,t believe you are that naive! As I have urged you in a previous thread check your history goverments and financial institutions do not and will not protect markets......... that be stock markets or housing markets!

Get real we live in a capitialist country market correction is a healthy way and the only way of controlling market bubbles and the current housing market is one hell of a bubble.

You fail to address the point. The point being that why did the BOE reduce rates when there are risks to inflation and indeed current inflationary factors such as rising oil prices? My hypothesis is that the BOE sees consumer confidence (as driven by increasing property values) as being the main driver of the economy and as such it (the BOE) will lower interest rates to stimulate rising property values and consumer confidence. I believe the BOE are trying to engineer a property market rising around 5% per annum. If you could suggest an alternative reason for lowering rates last month then please do so.

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Whats Gordy got to say about the BoE growth forecast as its a bit lower than his - has he dismissed it as a load of rubbish like all others before it?

How is he ever going to fill his tax black hole - by moving the economic cycle back to Victorian times??

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If that is true, then why did the BoE allow HPI to runaway at unsustainable growth a few years ago and refuse to increase interest rates to keep it under control?

because they wanted confidence to remain in the housing market!

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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