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Merv's Quarterly Report To Be Released Today


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HOLA441
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Mervyn King, has been warning for some time that inflation will be even higher above target than expected – due to commodity and food price rises.

http://www.fxwords.com/c/consumer-price-index-cpi-euro-zone.html

Consumer Price Index (CPI) - Euro-zone

....

As a rule, the Bank adjusts rates in order to keep Europe consumer price inflation in the 0 to 2 percent range.

http://www.tradingeconomics.com/Economics/Inflation-CPI.aspx?Symbol=EUR

Euro Area Inflation Rate

The inflation rate in Euro Area was last reported at 2.5 percent in January of 2011. From 1991 until 2010, the average inflation rate in Euro Area was 2.24 percent

http://www.businessweek.com/news/2011-01-31/euro-area-inflation-rate-probably-increased-to-2-3-.html

Jan. 31 (Bloomberg) -- European inflation probably quickened to the fastest pace in more than two years in January, keeping pressure on officials to monitor price gains that are exceeding the European Central Bank’s limit.

The inflation rate in the 17-nation euro region rose to 2.3 percent from 2.2 percent in December, according to the median of 37 forecasts in a Bloomberg News survey. That would be the highest since October 2008. Eurostat, the European Union’s statistics office, will publish the data at 11 a.m. in Luxembourg today.

http://www.tradingeconomics.com/economics/inflation-cpi.aspx?Symbol=USD

United States Inflation Rate

The inflation rate in United States was last reported at 1.50 percent in December of 2010.

The euro zone and the US must be consuming different commodities and food with their inflation rates only being 2.5% and 1.5% respectively. In comparison to the UK's 4%.

The euro zone and the US seem to be meeting their inflation targets a whole lot better than the UK.

Edited by billybong
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HOLA445

The euro zone and the US must be consuming different commodities and food with their inflation rates only being 2.5% and 1.5% respectively. In comparison to the UK's 4%.

The euro zone and the US seem to be meeting their inflation targets.

there there, just lie down and take your meds like a good boy.

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HOLA446

He clearly stated we had higher inflation than the other G7 because of the 25% fall in Sterling, whether you believe him after 2 years is another matter.

He also explained why the spread between the BOE rate and what the banks charge to lend and blamed this on wholesale funding costs :lol:

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Paul Mason and Merv having a barney.

I think that Paul was signalling his intent. See the last para from his latest blog:

And by the way isn't it time the mandarinat of Threadneedle Street started engaging with the British public on these issues: in actual interviews where actual journalists get to ask them actual questions - not the medieval ritual the Bank has constructed around the Quarterly Inflation report (of which more tomorrow)?

Paul Mason

Peter.

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HOLA448

Latest chart:

inflationfan0211.gif

Complete, total, nonsense. For the past 10 years, the best predictor of CPI at the 18 month time horizon has consistently been the current reading of CPI, yet the BoE is saying that there's only a 5% chance that CPI will be the same as it is now in 18 months time and there's no absolutely no chance that it will be anything more than 0.5% higher than the current reading? That's some credibility for you.

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On the bbc site now:

http://www.bbc.co.uk/news/business-12478468

"The Governor of Bank of England, Mervyn King, has said that inflation will rise sharply in the first half of this year before falling back next year.

But he said there were "large risks" that inflation could overshoot or undershoot the Bank's 2% target.

He reiterated his belief that external factors, such as rising food and energy prices, are the main cause of rising prices in the UK.

Mr King said growth would be weaker than the Bank forecast in November.

He said that once cost pressures from high commodity prices subside, "CPI inflation will then fall back. But the extent to which it will do so is uncertain, and there are large risks in both directions."

On Thursday, official figures showed that inflation, as measured by the Consumer Price Index (CPI), rose to 4% in January from 3% in December. Measured by the Retail Price Index (RPI), which includes mortgage interest payments, it rose to 5.1% from 4.8%.

Mr King was forced to write a letter to the Chancellor, George Osborne, to explain why CPI inflation was twice the Bank's target rate."

So bascally, all he's saying is that inflation will change at some point in the future. Probably up a bit , then down a bit, but maybe the other way around. Or it might not. Except that we know that it will increase and that he's a lying toerag.

Edited by Tenubracon
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The euro zone and the US must be consuming different commodities and food with their inflation rates only being 2.5% and 1.5% respectively. In comparison to the UK's 4%.

The euro zone and the US seem to be meeting their inflation targets a whole loy better than the UK.

Yes but Merv admitted this was down to the slaughter of retirement savings (sorry, must maintain the kind of cool detachment Merv has on account of his index-linked gilt pension pot) sterling.

Apparently we need this to "rebalance the economy." In case you don't understand what that means I'll give it a stab.

Say we are making this:

funny-pictures-mexican-suv-jRD.jpg

and the germans are making this:

2012-mercedes-benz-s-class-2.jpg

Let's say the GBP and EUR are at parity and that both cost GBP100K. Now, you & I might say a rebalancing of the economy might involve our country pulling its socks up and making something a bit more advanced. WRONG!

Why go to all that trouble when you have a helpful guy like Merv who can simply slaughter the pound sterling so that our vehicle only costs 1/1000th of the german version. Now, with our vehicle retailing at GBP100, orders are bound to flow in and our fuyure will be secure! Who needs to be competitive when you have a nice guy willing to rape the savings of any hard working citizen in the country, eh?

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On the bbc site now:

http://www.bbc.co.uk/news/business-12478468

"The Governor of Bank of England, Mervyn King, has said that inflation will rise sharply in the first half of this year before falling back next year.

But he said there were "large risks" that inflation could overshoot or undershoot the Bank's 2% target.

If anyone were to look back over the last 5 years of quarterly reports there's a good chance he's said more or less exactly the same thing in nearly every report during that period.

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Yes but Merv admitted this was down to the slaughter of retirement savings (sorry, must maintain the kind of cool detachment Merv has on account of his index-linked gilt pension pot) sterling.

Apparently we need this to "rebalance the economy." In case you don't understand what that means I'll give it a stab.

Say we are making this:

funny-pictures-mexican-suv-jRD.jpg

and the germans are making this:

2012-mercedes-benz-s-class-2.jpg

Let's say the GBP and EUR are at parity and that both cost GBP100K. Now, you & I might say a rebalancing of the economy might involve our country pulling its socks up and making something a bit more advanced. WRONG!

Why go to all that trouble when you have a helpful guy like Merv who can simply slaughter the pound sterling so that our vehicle only costs 1/1000th of the german version. Now, with our vehicle retailing at GBP100, orders are bound to flow in and our fuyure will be secure! Who needs to be competitive when you have a nice guy willing to rape the savings of any hard working citizen in the country, eh?

Precisely.

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inflationfan0211.gif

What I like about these charts is that no matter how hopeless the tracking has been in the past, lo, they ALWAYS end up back on trend in the "central projection".

This has important implications :

1 ) no matter the sophistication of the models, political makeup of the committee or wisdom and experience of individual member's "judgement", they always collude to agree that inflation will, in the medium term, revert to target., given the travel of market interest rates;

2 ) they thus abdicate responsibility for targeting to market interest rates and thus the market.

This poses the obvious question: what the f@ck is the point of the MPC?

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HOLA4418

Guardian now reporting Mervyn talks down prostect of early IR rises.

http://www.guardian.co.uk/business/2011/feb/16/bank-of-england-governor-dampens-interest-rate-talk

So this morning, he has openly admitted that inflation will rise sharply and that he's not going to do anything about it.

"Under the assumptions that Bank rate moves in line with market interest rate ... the chance of inflation being either above or below the target in the medium term are judged to be broadly balanced,"

So the 2% in 2 years has been jettisoned in favour of "medium term" which could mean anything.

It's time to jettison the idea of an inflation "target". Just give him a rubber stamp with "INFLATION TARGET MET" on it - appropriate for any level of inflation.

Edited by billybong
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HOLA4419

"I can't predict the future and even if I could I wouldn't do anything differently, but I'm still going to take my rather excellent salary and benefits package. See you all in three months when I shall repeat this message with a slightly different chart"

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The trouble is any body talented enough to design a car like that could earn 20x more as a bankster. It's a lot easier to steal money than to make it.

Indeed but in the long term there are consequences. Either for the banksters or for everybody else. Currently it looks as if everybody else is going to take the consequences.

Edited by billybong
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The other thing that's very evident from the fan charts is that the CPI rate only started to exceed the inflation upper target range (the beyond the pale point *) and gain hold once the LibDem/Con Coalition came into power and it gained strong momentum afterwards. That will have its own price at the next general election and the way things are going it could well be a devastating price for LibDem/Cons. That's quite apart from the affects of the austerity cuts etc.

Yes I know it's not as simple as that as it had a previous strong blip and it was trending upwards just before that but by the time of the next election that won't be remembered so well.

The tories of old used to have a reputation for fighting inflation - no more so.

* Beyond the pale: Unacceptable; outside agreed standards of decency.

Edited by billybong
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inflationfan0211.gif

What I like about these charts is that no matter how hopeless the tracking has been in the past, lo, they ALWAYS end up back on trend in the "central projection".

This has important implications :

1 ) no matter the sophistication of the models, political makeup of the committee or wisdom and experience of individual member's "judgement", they always collude to agree that inflation will, in the medium term, revert to target., given the travel of market interest rates;

2 ) they thus abdicate responsibility for targeting to market interest rates and thus the market.

This poses the obvious question: what the f@ck is the point of the MPC?

oi! someone has to be in the market for the famous bloo loo prediction curve device.

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HOLA4424

oi! someone has to be in the market for the famous bloo loo prediction curve device.

Sorry Bloo. Would not want to infringe any patents.

Looking again at the curve I am minded of a giant slalom skier who previously has missed every gate, zigging when zagging was required. Most recently he dug his edges in knocking rates to 0.5% and predictably shot across the course right into the trees. His ski tracks can be seen diverging to accomodate the trunk of a sturdy spruce, now flecked with shreds of salopettes and somebody's blood. A pole is wedged in the branches and a ski lies snapped in the snow some way off.

AND YET we are still supposed to believe said skier when he proclaims that not only will he hit a gate some time 18 months down the road, but will then negotiate the entire course, consistently hitting the target, despite his one ski, singular pole and smashed pelvis. :(

rahlves.jpg

It's Mervyn, but on a good day

Edited by Sledgehead
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HOLA4425

Good point.

Of course the question has to be asked now, did he know that his catastrophic devaluation of Sterling (impoverishing the entire country by nearly 40% in the process at peak) would lead to inflation 2 years out why didn't he know, or rather why was he not honest with the people?

Totally dishonest and undemocratic in all his pronouncements. And using communications as part of 'managing inflation expectations' is not a good enough reason in a democracy.

We are now at the point where our people can't afford to buy homes but overseas money is 'snapping up the bargains' leaving house prices at bubble levels.

I suppose the "why" question is just rhetorical. Central bank "independence" is a sick joke when monetary policy board members go one to make fortunes by "consulting" to banks and related industries after leaving the Bank of England. BoE independence took monetary policy decisions away from a democratically elected government and handed it to the banking industry. When Merv's future remuneration is completely dependent on pleasing the banks, what answer do you think he's going to come up with in setting interest rates?

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