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Boe Relying On 20% V A T As A Deflationary Tool

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http://uk.reuters.co...E70H1F920110118

Fisher reiterated that inflation was being pushed up by short-term factors, notably the rise in VAT sales tax and higher commodity prices.

"We have to look through those short-term things, despite whatever unpopularity comes our way, to try and set the best policy rates for the medium term," he said.

Of course a rise in VAT is likely to lead to a spike in prices in the short term.

But as a tax (and in isolation of other variables), its longer term effect is deflationary.

My contention is that the BoE believe this to be the case, and other than an early 25bp rise (shot accross the bows), are relying on it being the case.

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http://uk.reuters.co...E70H1F920110118

Of course a rise in VAT is likely to lead to a spike in prices in the short term.

But as a tax (and in isolation of other variables), its longer term effect is deflationary.

My contention is that the BoE believe this to be the case, and other than an early 25bp rise (shot accross the bows), are relying on it being the case.

The BoE are interested in rescuing banks

END OF.

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http://uk.reuters.co...E70H1F920110118

Of course a rise in VAT is likely to lead to a spike in prices in the short term.

But as a tax (and in isolation of other variables), its longer term effect is deflationary.

My contention is that the BoE believe this to be the case, and other than an early 25bp rise (shot accross the bows), are relying on it being the case.

All taxes are deflationary I would say.

I would also say the last thing the BoE want is deflation.

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The VAT increase also shows the problems of the early Tory fiscal policy. The BoE is saying we need more money and stimulus out there to drive demand, get people and factories working who are otherwise idled. Then the Tories come in and slam in a new tax that slows things down.

There is a time and a place for things. I think the Tories should have said when/if economic activity starts gaining some of its own momentum we will be increasing the VAT by 2.5%.

To give an analogy say a workcrew is trying to move a block forwards into position. It doesn't make sense for some workers to be pushing forwards, while others stand on the other side and push in the opposite direction.

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  • 312 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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