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Cpi Down To 1.6% - Interest Rate Rises, Not Really?!-------Merged

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http://ons.gov.uk/ons/rel/cpi/consumer-price-indices/july-2014/consumer-price-inflation-summary--july-2014.html



Cheap clothes, whisky, overdrafts and bread....




The rate of inflation faced by households slowed to 1.6% in the year to July 2014, down from 1.9% in June. The latest information continues the trend of below 2.0% inflation during 2014 although there has been some volatility in the rate over recent months.



An overall fall in the price of clothing between June and July was the main reason behind the decrease in the rate. Clothing prices usually fall between June and July due to the summer sales season but this year the falls are greater than usual. In part this is because clothing prices rose between May and June whereas they normally fall between these months. The change in these movements between 2013 and 2014 comes amidst some reports which imply a shift in the timing of summer sales compared with last year. The main downward effect came from a wide range of men’s, women’s and children’s outerwear, for example trousers, coats and jumpers.



Other notable price falls came from the alcohol and financial services groups. With alcohol, the largest downward effects on the change in the headline rate came from spirits (such as whisky, vodka and rum) and wine (particularly New World wine). In the financial services sector, some bank overdraft charges fell this year.


Prices of food & non-alcoholic drinks also fell on the month so that, overall, they are now 0.4% down on prices in July 2013 and have a downward pull on the headline inflation rate. The monthly falls here came from a variety of product groups including bread & cereals and sugar, jam, syrups, chocolate & confectionery.



To understand how inflation impacts on households it is worth looking past the monthly movements to focus on the sectors that contribute to the rate of inflation ie what makes up 1.6%, not what made inflation change from 1.9% to 1.6%. The former don’t change much from month to month but have the biggest impact on households. Prices in the housing, water, electricity, gas & other fuels sector continue to have the largest upward effect on inflation, contributing around a quarter of the total. On the other hand, motor fuels currently have a downward pull on inflation. Average petrol prices were around £1.31 in July this year compared with £1.35 a year earlier.



CPIH, the measure of household inflation which includes the costs faced by owner occupiers (not a National Statistic), grew by 1.5% in the year to July, down from 1.8% in June.



The National Statistics status of CPIH has been discontinued pending work by ONS to investigate and improve the method for measuring owner occupiers' housing costs in this index. Full details can be found on the UK Statistics Authority website and an explanatory note (313.9 Kb Pdf) on the ONS website.


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The UK inflation rate fell more than expected in July as the cost of clothing, footwear, food and non-alcoholic drinks eased back in the month.

But CPI remains well above average wages which grew by just 0.6% in the three months to June. Economists had expected inflation to fall to 1.8% in July.

http://www.bbc.co.uk/news/business-28850438

Blame the Russians for it.

Edited by rollover

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Clothing and footwear category was the largest contributor to the fall.

Good! It's hard to find an online shoe retailer that takes Bitcoin and I could not believe how much proper leather shoes were last time I looked in M&S.

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Good! It's hard to find an online shoe retailer that takes Bitcoin and I could not believe how much proper leather cheap imported shoes were last time I looked in M&S.

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Clothing and footwear category was the largest contributor to the fall.

Sterling immediately gapped down by half a cent against the dollar.

CPI_0714b.gif

CPI_0714a.gif

http://www.ons.gov.uk/ons/dcp171778_374190.pdf

Markets would sooner have the possibility of higher interest rates than a currency holding its buying power. Always seems an odd way of looking at things to me. Low inflation will always preserve a currencies value better than small adjustments in interest rates.

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and with the oil price declining right now, that might be a fall for August too....

No interest rate rises?

@nictrades tweeted "So the only pressure on Carney to hike rates is the house price inflation stoked by George Osborne"

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and with the oil price declining right now, that might be a fall for August too....

No interest rate rises?

@nictrades tweeted "So the only pressure on Carney to hike rates is the house price inflation stoked by George Osborne"

I'm thinking no interest rate rises, no house price crash. But a sudden dawning on those holding richly prices assets that it doesn't work as we go Japanese.........no asset appreciation, no mortgage shrinkage, just ball crunching stagnation and a life sentence for those who filled their boots with debt.

Suddenly cash looks bloody attractive at 2%.

Edited by crashmonitor

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I'm thinking no interest rate rises, no house price crash. But a sudden dawning on those holding richly prices assets that it doesn't work as we go Japanese.........no asset appreciation, no mortgage shrinkage, just ball crunching stagnation and a life sentence for those who filled their boots with debt.

Suddenly cash looks bloody attractive at 2%.

+1

Economic activity appears to be slowing dramatically as we move into the second half of the year. We'll be flatlining again by Christmas unless Comrade Osborne ramps up his borrowing and spending. :ph34r:

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The annual rate as measured by RPIX (which the BoE used to target at 2.5% before the switch to CPI) stood at 2.6% in July.

As usual the ONS don't make it easy to find anything, simple 12 month tables would be nice (similar to Haliwide) on the first page.

RPI was 256.3 in June down to 256.0 MOM. CPI was 128.3 in June down to 127.8. Hants CC table is very good but they don't update for a while.

RPI still matters for NS and I valuations and certain annuities.

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Treasury minister David Gauke on BBC News.

Asked about the 10.2% house price inflation, Gauke - "......we've put in place Help to Buy which is helping people get onto the housing ladder...."

Every day some government joker says something that reinforces my decision to vote UKIP.

Edited by Bruce Banner

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MPs to grill Carney over interest rate pact suspicions.

http://www.cityam.com/1408409721/mps-grill-carney-rate-pact-claim

Bank of England governor Mark Carney will be quizzed by MPs next month over whether he has faced any political pressure to keep interest rates at their historic low.

Carney and chancellor George Osborne have been hit by suggestions this week that they struck a deal to keep rates low until after the election. Mark Field, MP for the Cities of London and Westminster, said in yesterday’s City A.M. that “there was a clear bargain between him [Carney] and Osborne” to keep rates down.

And City A.M. understands the influential Treasury Select Committee (TSC) of MPs will use a hearing with Carney next month to ask him about his relationship with Osborne.

Both the Bank of England and the Trea­­sury have vehemently denied that there is any pressure on Carney.

And the Bank insists the decision on interest rates is solely down to the nine-strong monetary policy committee (MPC), on which Carney is only one member.

“The Bank of England has to act independently, otherwise the whole thing becomes farcical – you get back to the worst case scenario where the chancellor is deciding rates covertly,” TSC mem­ber Mark Garnier MP told City A.M. “The Treasury committee is very cognisant of this kind of risk.”

When Carney has previously been asked, he has denied there is any political pressure placed on him.

The Bank of England has been able to set interest rates free of political influence from the chancellor by Gordon Brown in 1997.

Previously, the worry had existed that chancellors would be tempted to cut interests before elections, engineering short term economic booms to give them a lift in the polls, even if it would do harm in the longer-term by encouraging reckless borrowing.

The government is known to be concerned about the political risks posed by an interest rate rise to its re-elect­ion hopes.

Next May’s general election campaign is expected to focus on the economy, with the chancellor promoting the recovery, and Labour continuing its complaints about the cost of living.

If interest rates rise, it would push up bills for borrowers and so the Conservatives fear it would improve Labour’s prospects.

Writing in today’s City A.M., Mark Field says he believes “the chancellor has surely had an unspoken understanding with Carney from the outset of their relationship.

“With the date of destiny with the voters soon upon us, brave would be the governor who risked his patron’s scorn with a rate hike in advance of 2015’s poll,” Field writes.

And yesterday TSC member John Mann told the Evening Standard he too believed Carney was holding back a rate hike “until after the election when they rise immediately.”

The current consensus among economists is that interest rates will rise in the first quarter of 2015, a few months before the election.

Some had predicted a rate hike in the final quarter of 2014, but comments by Carney last week pushed back those expectations.

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Mark Field, MP for the Cities of London and Westminster, said in yesterday’s City A.M

Mark Field

City AM

Nexus of nonsense.

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Bank of England governor Mark Carney will be quizzed by MPs next month over whether he has faced any political pressure to keep interest rates at their historic low

He should also be asked to confirm his allegiance as apparently as Governor of the BoE he doesn't have to swear an Oath or Affirmation (unlike the MPs) - even if only as a formality.

http://

www.parliament.uk/site-information/glossary/oath-of-allegiance/

In the House of Commons, after election, an MP must swear an Oath of Allegiance before taking his or her seat. Members who object to swearing an oath may make a Solemn Affirmation instead.

Edited by billybong

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To be fair, bread and whisky are essentials.

And what better way to offset the increasing cost of heating your home than fattening yourself up and getting tanked up on booze?!

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I do have a VI in low rates however I can't see why rates should go up. The BofE has a target rate of 2% at the moment it's 1.6% wage rises are at 0.6%. So maybe they should raise rate because people are borrowing too much?

Each adult has borrowed £78.93 more than last year. However a 0.6% pay rise will mean that they have an extra £140 in pay.

If you think of Thomas Piketty's r>g with growth said to be 3.5% this year return on interest should be below that figure surely?

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bbc: The UK inflation rate fell more than expected in July

Fell? It seems to have gone up by 1.6%; more than I get in my savings account.

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