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The Masked Tulip

'core' Inflation Creeps Higher In The Us And Europe

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Moneyweek's daily email had an article on inflation today:

It is nice to get a balanced economic POV rather than lazy TV and Press journos simply pumping out the press releases of the VIs.

On the subject of banking – as we pointed out yesterday, one of the main reasons for the dip in the inflation rate last month was that bank charges rose more slowly than they did a year ago.

We said that this is unlikely to continue as banks feel the squeeze from bad debt and competition for credit. And as if to prove us right, HBOS has announced changes to the terms of its popular “One” credit card. The 0% interest rate period on purchases is being slashed from 12 months to just 3 months. Interest will then be charged at 15.9%, rather than 12.9% APR.

It just goes to show that “even some of the big players…are having to take action to claw back some of the costs associated with the 0% credit card war and more recently the rising levels of personal bad debts”, said Andrew Hagger of comparison group Moneyfacts.

But the Bank of England is still hedging its bets when it comes to inflation. The bank’s quarterly inflation report was a little more dove-ish than the August edition, but still pointed to interest rates remaining on hold for the time being. Governor Mervyn King said: “There are substantial risks to the outlook in both directions.”

But while the inflation picture might seem cloudy in the UK, it’s looking a lot clearer across the rest of the world.

Inflation in the eurozone was higher than expected. The headline rate came in at 2.5% in October. This was down from 2.6% in September, but still far above the European Central Bank’s 2% ceiling.

More to the point, the core rate, which excludes fuel and food, actually picked up from 1.3% to 1.4%, meaning that some of those “second round” effects that economists have been dismissing are starting to come through.

Meanwhile, on the other side of the Atlantic, core inflation is also continuing to creep higher. The headline rate came in at 4.3% from 4.7% in September. But core prices are now rising at an annual rate of 2.1%, from 2% in September.

There was further bad news for inflation doves, as US stockpiles of crude oil and petrol (gasoline) fell unexpectedly in the week to November 11, arresting the recent decline in oil prices. Oil cartel Opec also raised its 2006 oil demand forecast.

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  • 301 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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