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Inflation And How I R Hikes Didn't Work Before

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The UK and Southern Californa share many characteristics and especially HPI, credit bubbles, slowing employment and population growth:


By Dean Calbreath


June 21, 2006

With a slowing housing market, rising interest rates and sky-high prices of oil, the United States may be poised for the rebirth of an economic malaise that has not been seen since the 1970s: stagflation.
That is the warning being issued in a report today from economists at the UCLA Anderson Forecast.
“The (Federal Reserve) is in a box,” said David Shulman, senior economist for the Anderson Forecast, one of the West Coast's leading economic think tanks. “For the first time in several years, the Fed will soon be faced with rising measured inflation alongside weakening economic growth, sort of a low-grade stagflation.”
Stagflation is a combination of a stagnant economic growth and rising inflation: an economic double-whammy that could throw an economy into a tailspin.
They add that the higher interest rates, while slowing the economy, will do little to slow inflation. In the past two years, the Federal Funds interest rate has risen from 1 percent to 5 percent as Federal Reserve Chairman Ben Bernanke and his predecessor, Alan Greenspan, tried to stem the threat of inflation.
But economists note that inflation is being fueled by higher oil prices, which are not affected by interest rates. Overall inflation rose 4.2 percent over the past year. And core inflation – minus food and energy costs – has risen at an annualized rate of 3.1 percent this year, a pace higher than Bernanke's goal of 2 percent or less.

The conclusion that rising IR have done little to control inflation seems true. The Fed has hiked 17 times yet inflation has grown during that time. Bears' hopes that IR will be the trigger may be a little misplaced. The general direction of the economy with lower employment numbers, worsening deficit and high oil proces may do the trick once again.

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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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