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The Masked Tulip

Housing Costs Must Be Included In Inflation Target, Says Osborne

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labour removed it , the conservatives are putting it back in

'they' are not the same

I am aware of it. But in this case "they" refers to the government, and if they remove it now, they will be playing the same game - picking the index that will show the lower value.

sure it should never have been taken out of the inflation calculation but blame labour for that not the tories

I've been blaming Brown for it for a long time. I used to have a chart about that in my signature. And my posts about it are still in the Pinned Charts Thread.

And if Osborne switches back now, he will be doing the same manipulation. Or, to be precise, completing the "cycle" of manipulation: removed whilst it was going up, and put back, near the peak, considering housing costs as it falls.

Note that if CPI is kept all the way to the bottom, then Browns move will be compensated, corrected.

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Why would you expect anything else?? All the figures are what they need them to be. After all there are only 1.65m unemployed, which is quite low :huh:

The move to RPI, with falling housing costs, would show a lower inflation, and set interest rates lower, helping economic activity. It will reduce unemployment. That is why they will do it. And it will benefit borrowers also. All this at the costs of savers though, and property owners.

.

Edited by Tired of Waiting

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I am aware of it. But in this case "they" refers to the government, and if they remove it now, they will be playing the same game - picking the index that will show the lower value.

That depends on how it is measured. If it is mortgage or rental costs, then these will fall much slower than house prices (i.e. purchase prices), and may even rise if "they" decide to protect our currency by raising interest rates. A 50% drop in house prices will only lower the mortgage costs of new purchasers.

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That depends on how it is measured. If it is mortgage or rental costs, then these will fall much slower than house prices (i.e. purchase prices), and may even rise if "they" decide to protect our currency by raising interest rates. A 50% drop in house prices will only lower the mortgage costs of new purchasers.

Yes, I agree that it will depend on how it is measured. However, if the government thinks that RPI will be higher than CPI, then they will stay with CPI.

If by "protect our currency" you mean keep sterling high, then, no, this is not government policy. Quite the opposite. It is a virtual consensus that we need sterling to fall more, first to contain imports (they react faster), and then to help exports (slower, as exporters need to open new markets, etc.)

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what measures of housing costs are currently included in RPI?

Good question. However, as I wrote above, if the government thinks that RPI will be higher than CPI, then they will keep CPI.

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If I were feeling cynical, I might suspect that Osborne wants housing to be included in inflation figures because it will drag the overall figures down. In other words, while all other assets go to the roof in price, a HPC will drag the figures in the opposite direction.

Funny how housing was not included in overall inflation figures when we had HPI.

But you're not feeling cynical - are you?

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Won't this potentially allow them to inflate some of the debt away w/o needing to raise inflation-linked public sector pensions?

Depending on the index they use for that, yes.

I don't know if they use CPI or RPI for public sector pensions. But if they used CPI whilst housing costs were going up, and move to RPI as costs go down, then yes, they "complete the cycle", and hide forever that inflation - the difference between CPI and RPI between 2003-2011. (There are at least 2 charts about that difference in the Pinned Charts Thread. I put them there.)

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Depending on the index they use for that, yes.

I don't know if they use CPI or RPI for public sector pensions. But if they used CPI whilst housing costs were going up, and move to RPI as costs go down, then yes, they "complete the cycle", and hide forever that inflation - the difference between CPI and RPI between 2003-2011. (There are at least 2 charts about that difference in the Pinned Charts Thread. I put them there.)

I believe pay negotiations and pensions etc are RPI not CPI linked.

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Aren't high prices, increasing taxes and lowering wages an odds-on bet?

UK wages need to become globally competitve.

Adding a dropping asset into the CPI basket allows this to happen.

A bag of 6 apples can cost £2.60 in Tesco, petrol £1.20 a litre. And these will seem cheap in a few years time.

Come one everyone, get with the program.

Edited by euroconv

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  • 276 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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