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Bank's Posen Says Inflation Expectations Stable

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http://uk.reuters.com/article/idUKTRE69K3Y920101021

Inflation expectations in financial markets and among the general public are stable, Bank of England Monetary Policy Committee member Adam Posen said in a newspaper interview published on Thursday.

"Markets and people in Britain understand clearly that we will bring the inflation rate back to its goal of 2 percent," Posen said in an interview published in German on the website of the Austrian newspaper Der Standard.

Inflation is currently 3.1 percent, and MPC member Andrew Sentance has worried that this is putting upward pressure on inflation expectations.

"In reality inflation expectations are stable," said Posen, who voted for more quantitative easing at this month's MPC meeting.

He cited index-linked government bonds and sterling futures as evidence of the stability of inflation expectations.

By contrast, he said that some people had been misled into buying gold because of misplaced concerns about price stability.

Posen had addressed an Austrian central bank conference in Vienna earlier on Thursday.

Stable at 3.1%?

Or stable on the upward trend line?

I clearly understand you'll bring inflation back on target, what's the MPC success rate over the past 50 months 9 out of 50?

Yep clearly we've got the right people in charge.

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Stabley increasing I think he means.

It's above the banks upper limit and has been for some time. Yet they do nothing about. What's the point of limits and targets?

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If you strip out VAT changes the trend is down, currently at 1.4%

Not everything in CPI are subjected to VAT. 2.5% rise in VAT only has about 1% effect on CPI. So that is still 2.4%.

If you look at RPI (where the only thing related to house price is the rental component, which account for about 5% of the index),

it is running at 4.x%.

Talk to someone who runs a restaurant and all the commodities prices are way up. A sack of rice goes from £15 to £19.

Maybe Mr Posen can eat BoE electronic money, but we mere peasant certainly can't.

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He is attempting to justify his vote for QE despite inflation being 1%+ over target for 7 months in a row. Essentially he is saying he is ignoring the government inflation target as he thinks inflation is not going out of control.

We had an inflation problem before in the 1980's that required double digit interest rates for several years to bring under control.

The BOE have a rather short memory and are taking an inflation gamble.

If they are wrong we might get a HPC after all.

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Not everything in CPI are subjected to VAT. 2.5% rise in VAT only has about 1% effect on CPI. So that is still 2.4%.

If you look at RPI (where the only thing related to house price is the rental component, which account for about 5% of the index),

it is running at 4.x%.

Talk to someone who runs a restaurant and all the commodities prices are way up. A sack of rice goes from £15 to £19.

Maybe Mr Posen can eat BoE electronic money, but we mere peasant certainly can't.

Official CPIY, which is CPI excluding changes in indirect taxes, is 1.4%. I agree RPI is a better, so an RPIY would be good to see. But CPIY is all we have. Anyway, it still does a good job of illustrating why the headline figures are currently meaningless when looking at the trend whilst indirect taxes are distorting so much

Picture-6.png

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Not everything in CPI are subjected to VAT. 2.5% rise in VAT only has about 1% effect on CPI. So that is still 2.4%.

If you look at RPI (where the only thing related to house price is the rental component, which account for about 5% of the index),

it is running at 4.x%.

Talk to someone who runs a restaurant and all the commodities prices are way up. A sack of rice goes from £15 to £19.

Maybe Mr Posen can eat BoE electronic money, but we mere peasant certainly can't.

I'm sure I read somewhere that the housing component of RPI was 80% mortgage servicing costs, and 20% rents. Anyone know the definitive answer, and how big this housing component is?

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I'm sure I read somewhere that the housing component of RPI was 80% mortgage servicing costs, and 20% rents. Anyone know the definitive answer, and how big this housing component is?

@oldsport : thanks for RPIX

@50sQuiff: RPI

Total: 1000 parts

Clothing 56

Fares and other travel : 20

Personal goods and services 40

Leisure goods : 47

Motoring (new/old car prices, maintenance/petrol/insurance/tax): 128

Leisure services: 59

Catering : 49

Alcoholic drink : 80

Tobacco : 34

Food : 136

Housing: 186

Fuel and light : 41

Household goods: 72

Household services: 52

---------------

Breakdown of housing: (total : 186)

Rent 47

Mortgage interest payments 39

Depreciation 29

Council tax and rates 30

Water and other charges 11

Repairs & maintenance charges 10

DIY materials 12

Dwelling insurance and ground rent 8

So, there is only one way RPI will go and I better learn how to eat electronic money...

Edited by easybetman

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  • 140 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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