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EvilEdna

Vat Rise Inflation And Interest Rates

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It seems pretty clear that we're heading for a steep increase in VAT. Given that this will further drive up prices, how long is it before the BofE caves in and raises interest rates? I've seen it reported that the lovely Mervyn King believes we'll be able to keep rates low for years, but I can't see how this can be made to square with the bank's remit.

No rate rise no HPC, so - when will rates rise?

I'm guessing spring 2011.

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It seems pretty clear that we're heading for a steep increase in VAT. Given that this will further drive up prices, how long is it before the BofE caves in and raises interest rates? I've seen it reported that the lovely Mervyn King believes we'll be able to keep rates low for years, but I can't see how this can be made to square with the bank's remit.

No rate rise no HPC, so - when will rates rise?

I'm guessing spring 2011.

They know is going to rise and used in their forecasts. This adds to the 'temporary spike' in inflation that they have forecast for this year, the question is will this spike be temporary? With the pound now barely $1.46 and falling I don't think this spike will be temporary. Many forecasters predict rises this year. Barclays capital 0.25% rise in June. Serveral others in the autumn so we will have to wait and see.

Although a rate rise will cause HPC I don't believe it is essential and it will happen regardless.

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Inflation is on the up although the BoE spends its time saying it isn't. The true rate as per RPI was 4.4% in April and rising. They will be forced to raise rates by the autumn.

Even if the Boe does not raise base rates, the money markets will do. BoE are not going to provide the £300bn mortgage liquidity put in for the 'crisis' over again. It ends very soon. Just watch out as mortgage funds become very tight. Look at the number of homes now coming on the market. A huge change and growing. People have not suddenly thought they will sell because it's spring. It's financial reasons making the chnage so apparent. It started before the election is continuing unabated. The number of sales are totally unable to keep up. The weight of inventory, cuts, tax rises, increasing unemployment, uncertainty and inevitable rate rises to come, will ensure the HPC that begun in 2008, will resume.

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I reckon Portillo had it the other day.

Taxes are going to rise more than people think, and we'll get stagnation.

The "measured inflation" this causes will do the BoE's job of keeping CPI positive without more QE.

The taxes will pay off the debt. And kill us all, of course.

It might just work.

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I think they'll ignore the inflation caused by the VAT rise.

Whether they can keep ignoring the rest of inflation is another question.

They'll more than ignore it - it will be used to handwave away a huge chunk of inflation, much greater than that actually caused by the VAT rise.

Strange how, when all the media was parroting the government line about an imminent deflationary death spiral, no-one ever seemed to question why the government would lower VAT which had a further deflationary effect. Indeed, so desperate was the media to perpetrate the myth of deflation that they even switched to trumpeting the RPI figures as evidence of deflation happening. Never mind that the official measure was CPI and before that RPIx, neither of which ever went YOY negative.

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What do the BoE consider as low?

Did they say they don't foresee a reason for interest rates to go above 0.5% for the next couple of years? Or did they say they don't foresee a reason for them not to stay "low"? The BoE might see 2% as being low....or even 3%...

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Sterling has fallen the best part of 10% against the dollar.

Huge imported goods / materials inflation in one month as most goods and commodities still priced in dollars on the world market.

Gong to struggle to hide that lump under the VAT carpet.

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What do the BoE consider as low?

Did they say they don't foresee a reason for interest rates to go above 0.5% for the next couple of years? Or did they say they don't foresee a reason for them not to stay "low"? The BoE might see 2% as being low....or even 3%...

2-3 thousand percent.

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Sterling has fallen the best part of 10% against the dollar.

Huge imported goods / materials inflation in one month as most goods and commodities still priced in dollars on the world market.

Gong to struggle to hide that lump under the VAT carpet.

Ys but you can fiddle it the CPI basket is only filled with gravel and saw dust anyway.

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It seems pretty clear that we're heading for a steep increase in VAT. Given that this will further drive up prices, how long is it before the BofE caves in and raises interest rates? I've seen it reported that the lovely Mervyn King believes we'll be able to keep rates low for years, but I can't see how this can be made to square with the bank's remit.

No rate rise no HPC, so - when will rates rise?

I'm guessing spring 2011.

no rate rises till the fiscal consolidation is completed, at least a parliament away.

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It seems pretty clear that we're heading for a steep increase in VAT. Given that this will further drive up prices, how long is it before the BofE caves in and raises interest rates? I've seen it reported that the lovely Mervyn King believes we'll be able to keep rates low for years, but I can't see how this can be made to square with the bank's remit.

No rate rise no HPC, so - when will rates rise?

I'm guessing spring 2011.

Could be. Definitely within a year. Many voters have already factored it in mentally, so no anti-Tory/LibDem backlash there. Except from the Mail/Torygraph et al, but they're just sh!te-stirrers anyway. The previous 17.5 > 15.0 < 17.5% seemed all a bit of a damp squib and inconsequential to most shoppers, was the impression I got from talking to customers in my shop.

Anyway, 20% is an easier figure for the numerically challenged (not that there are any here, of course.). What the heck - bring it on ! :)

Edited by johnny5thumbs

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Apart from the fact that a huge majority of people will think a VAT rise of x% means the price will go up by x%.

That's not how the maths works. As read somewhere on here, if VAT rises from 17.5% to 20%, the rise in overall price is approx. 2.1%.

I think there's an opportunity to put 5% on 'unhealthy' foods but the definition might be hard and would probably result in another set of committees and quangos / food nazis.

They could argue away the CPI increase as a 'blip' that would fall out in 12 months.

Edited by deflation

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  • 259 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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