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Uk Headed For Deflation Says Bank Of England

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Well that's what he hopes.

Savers and borrowers might have other ideas. Low inflation might encourage retrenchment on both counts...paying down debt and compensating for low yield.

QE, you chump, has caused deflation.

Edited by crashmonitor

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Mark Carney says that while inflation to enter negative territory, that UK should not fear deflationary spiral

http://www.telegraph.co.uk/finance/bank-of-england/11406953/Bank-of-England-to-hold-interest-rates-as-UK-heads-for-falling-prices.html

It would appear that the BoE's forecast model has failed comprehensively again. How can we have any confidence in what it's saying viz. a deflationary spiral?

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V interesting that Carney said rates could go below 0.5% in UK. The Bank previously indicated that was "effective zero"

Mixed message

Moment after

Mark Carney defends charges of the Bank being opaque on its policies. He says the Inflation Report and his letter to the chancellor give as much clarity as they can give - the Bank will look through one-off price shocks and return inflation to target within next two years. He says this will require limited rises in interest rates over that period. It's clear that the next move will be "an increase in interest rates".
Edited by Gerinako

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Well that's what he hopes.

Savers and borrowers might have other ideas. Low inflation might encourage retrenchment on both counts...paying down debt and compensating for low yield.

QE, you chump, has caused deflation.

QE didn't cause the deflation, in fact it has held it off for seven years and it is only reasserting itself now that the Fed has tapered off the dollar printing. The deflation is a natural effect of the bursting of practically the biggest bank credit bubble ever blown.

They can either do even more money printing to keep staving it off, until they ultimately tip things into hyperinflation, or they can now let it play out with an even more disastrous crash than would have been the case in 2008 when Lehman Bros went pop and the entire global finance system faced the consequences of it's own greed and corruption.

No prizes for guessing that it will be QE full steam ahead by the Fed and BoE, to join the ECB and BoJ.

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Carney made it quite clear there isnt any deflation.

Why do people insist on confusing a temporary fall in oil prices due to a supply shock with deflation? Ridiculous.

Wages are rising, oil shock has happened, slack is rapidly disappearing. There is no deflation. If you believe there is, you will make the wrong decisions.

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Well that's what he hopes.

Savers and borrowers might have other ideas. Low inflation might encourage retrenchment on both counts...paying down debt and compensating for low yield.

QE, you chump, has caused deflation.

absolutely. QE has created a vortex in the bond trade of huge velocity,sucking all cash and new credit out of the general economy where the velocity is plummeting.

The 1% get spectacularly rich and the rest gasp for a farthing.

Nice system. When the wheels come off this baby you'd better stand back.

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It's Mr Carney's Forward Guidance.

It's been proven to have no value in predicting what's going to happen or in guiding the way forward.

Edited by billybong

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Carney made it quite clear there isnt any deflation.

Why do people insist on confusing a temporary fall in oil prices due to a supply shock with deflation? Ridiculous.

Wages are rising, oil shock has happened, slack is rapidly disappearing. There is no deflation. If you believe there is, you will make the wrong decisions.

Haha, very Baghdad Bob esk.

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repeat after me " there is no deflation"

Commodities fell off a cliff, especially the big one, oil.

strictly speaking there is monetary inflation, about $10 trillion since 2009. But you can't make water flow uphill, and the central bank cannot tell us the money is leaving the bond trade, when it isn't.

This is a bank bailout, and the general economy is gasping for funds. Hence commodity demand has cratered.

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The state broadcaster has just been repeating the deflation bad mantra. Using the example of borrowing £1300 to buy a bike. Said that in ten years the debt will still be £1300. Er, yeah, if you buy your bike with an INTEREST ONLY loan over 10 years. See what they did there? Thing is, I'm sure you can buy a bike for a fraction of that.

Edited by ticket2ride

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Well Carney does make it clear re the differences in deflation. I suppose once the year on year comparison falls off CPI and an uplift in wages suggests strong growth. Public sector wage growth is weak so must be private sector powering ahead. I have not looked at the report but imagine it is some kind of Lawson style boom in the forecast with a interest rate rise bought forward?

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The state broadcaster has just been repeating the deflation bad mantra. Using the example of borrowing £1300 to buy a bike. Said that in ten years the debt will still be £1300. Er, yeah, if you buy your bike with an INTEREST ONLY loan over 10 years. See what they did there? Thing is, I'm sure you can buy a bike for a fraction of that.

Am I missing something here? Surely if it was an interest-only loan, and inflation was positive, the debt outstanding would be the same, but you'd have paid more interest (as the IR would be higher).

Edit - for clarity.

Edited by dpg50000

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Am I missing something here? Surely if it was an interest-only loan, and inflation was positive, the debt would be even higher (as the IR would be higher).

My point was I've never heard of interest only loans for bicycles. They seemed to be using it as a proxy for that which dare not speak it's name, mortgage debt. And the debt not being inflated away in a deflationary environment.

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BBC was reporting that there may be interest rate cuts, Guardian goes with Bank of England says interest rates may rise sooner than expected

:huh:

Well I think the term is negative inflation which is odd but it does help if have positive inflation, negative inflation and deflation.

Edit- not sure on rate cuts. I thought there was a problem there due to some building society tracker products (maybe they are -0.25under base or something).

Edited by Ash4781

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http://www.bbc.co.uk/news/business-31438213

Inflation in the UK could temporarily turn negative in the spring because of falling oil prices, the governor of the Bank of England has said.

Correct me if I'm wrong but is there such a term as negative inflation – surely if is deflation?

This man speaks with fork tongue.

As others point out this just the hangover from market interference 6 years ago. Their solution is further market interference.

Imagine if we'd just got on and taken the medicine.

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Just bought a 750g loaf of bread today, when for years full loaves have always been 800g. I really thought they'd struggle to sneak that inflation-by-shrinkage through. On the other hand, it was cheap.

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