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Realistbear

Treasury Respond To Today's Devastating Inflation News

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http://money.guardian.co.uk/businessnews/s...1823427,00.html

Government braced for rate rise

Larry Elliott, economics editor

Tuesday July 18, 2006

The Guardian

The government was softening up the public today for an increase in interest rates after soaring gas and electricity bills pushed the annual rate of inflation to its highest level since Labour arrived in office more than nine years ago.
With prices for domestic energy rising by almost 30% in the past year, the cost of living in the year to June was up by 2.5%, according to the consumer prices index -up from 2.2% in May and a
far worse outcome than the City had expected
.
Ed Balls, the economic secretary to the Treasury, responded swiftly to the news that inflation was running 0.5 points above the government's 2% target. "At this time of global uncertainty it is important that policymakers remain vigilant to the risks and forward looking in their approach. Today's inflation data confirm the need for such vigilance in the face of such risks," Mr Balls said.
Matthew Sharratt, economist at Bank of America, said: "They are a bit of a shock. (But) I don't think they'll be enough to tip the balance of the MPC towards a rate hike as early as August."

Gordon is going to have to be more than vigilant. He is going to be forced to tell the BoE to do something. They have covered themselves with the "global uncertainty" phrase which can shift blame everywhere and anywhere. But, knowing Gordon the B of A could be proven right. If I was going to bet on a hike in August I am afraid I would bet against. Not because it shouldn't be done but because I don't think Gordon will risk his HPI-MEW machine and No. 10 for anything.

Edited by Realistbear

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Guest Bart of Darkness
The government was softening up the public today for an increase in interest rates after soaring gas and electricity bills pushed the annual rate of inflation to its highest level since Labour arrived in office more than nine years ago.

Just how much softening up we see in the next few weeks will give a good indication of when IR rates are going up, August or sometime later in the year.

Might be worth putting a tenner on an August rise though.

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Most important news of the day IMO

This kid could be the next chancellor and it looks like he believes in taking the bull by the horns.

Thank f0ck some dogs still have some teeth.

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Most important news of the day IMO

This kid could be the next chancellor and it looks like he believes in taking the bull by the horns.

Thank f0ck some dogs still have some teeth.

You talking about Ed Balls???

FFS - this man is the "brains" behind Browns Economic HPI/MEW Miracle - Brown knows F*ck all about economics, hes a lawyer-turned career politician, and knows about as much about economics as my dog after eating a copy of Ecomomics For Dummies

Ball will no doubt become Chancellor, if Brown gets to be PM, and once a suitable fall guy is given the post 1st whilst the Miralce Ecomomy falls apart in new hands

Edited by jp1

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http://money.guardian.co.uk/businessnews/s...1823427,00.html

Government braced for rate rise

Larry Elliott, economics editor

Tuesday July 18, 2006

The Guardian

The government was softening up the public today for an increase in interest rates after soaring gas and electricity bills pushed the annual rate of inflation to its highest level since Labour arrived in office more than nine years ago.
With prices for domestic energy rising by almost 30% in the past year, the cost of living in the year to June was up by 2.5%, according to the consumer prices index -up from 2.2% in May and a
far worse outcome than the City had expected
.
Ed Balls, the economic secretary to the Treasury, responded swiftly to the news that inflation was running 0.5 points above the government's 2% target. "At this time of global uncertainty it is important that policymakers remain vigilant to the risks and forward looking in their approach. Today's inflation data confirm the need for such vigilance in the face of such risks," Mr Balls said.
Matthew Sharratt, economist at Bank of America, said: "They are a bit of a shock. (But) I don't think they'll be enough to tip the balance of the MPC towards a rate hike as early as August."

Gordon is going to have to be more than vigilant. He is going to be forced to tell the BoE to do something. They have covered themselves with the "global uncertainty" phrase which can shift blame everywhere and anywhere. But, knowing Gordon the B of A could be proven right. If I was going to bet on a hike in August I am afraid I would bet against. Not because it shouldn't be done but because I don't think Gordon will risk his HPI-MEW machine and No. 10 for anything.

On the other hand they're spinning this

Bank of England may look beyond jump in inflation

LONDON (Reuters) - Interest rate hike fever hit UK financial markets on Tuesday after an unexpected jump in inflation but Bank of England policymakers will probably be wary of raising borrowing costs yet.

The pound shot up and short sterling interest rate futures dived after official figures showed a record rise in household bills pushed the main inflation rate up to 2.5 percent -- half a point above the BoE's target.

RBS changed its rate view and is now predicting an increase from 4.5 percent in August when the BoE publishes its quarterly forecasts on growth and inflation.

Other analysts who had only recently torn up their forecasts of higher borrowing costs were forced into a rethink. But the issue is not clear-cut.

Much of the rise in the CPI rate was driven by soaring household bills -- these were up nearly 10 percent on the year -- as higher global energy prices exact their toll.

BoE Governor Mervyn King said last month that such increases would hit Britons' wallets and moderate consumer spending.

"Prices going up as well as living in London means my pay cheque isn't going to go that far," said Kaiser Kamran, a young graduate working at a City of London bank.

Most wage deals still seem to be bunched around 3 percent increases but workers are paying much more for their gas and electricity bills, for filling up their petrol tanks or in local taxes.

"Higher energy bills are a tax on the consumer. They should only worry a central bank when they create second round effects, i.e., consumers can demand higher wages," said John Butler, UK economist at HSBC Markets.

That is looking unlikely. The latest official numbers show unemployment rose to a 5-1/2 year high in the three months to May. The number of people on benefits has increased by about 100,000 so far this year.

Public sector workers, who make up one in five of the working population, are facing a real squeeze as the government has repeatedly signalled they should expect pay rises of little more than 2 percent -- the government's inflation target.

WE KNEW THAT

While City analysts were surprised by the June inflation numbers, Monetary Policy Committee members might be less so.

"(It) brings the second quarter bang into line with what the MPC had forecast in May -- 2.24 percent compared to 2.27 percent forecast," said Danny Gabay, economist at Fathom Consulting.

Inflation looks likely to rise further in the coming months as the latest tensions in the Middle East have threatened to send UK petrol pump prices above a pound a litre, and pre-announced rises in household bills keep feeding through.

But economists said inflation could be on its way down by September as the effects of utility tariff increases fade, as long as oil prices, which hit another record high this month, don't keep climbing

The BoE disregard what is effectively an energy-related effect, especially in view of the precarious state of financial markets and increasing signs of a slowdown in the U.S. economy.

"For the moment, we retain the view that a pre-emptive rate hike is a risk rather than the most likely scenario," said Alan Castle, UK economist at Lehman Brothers.

So, rabbits in headlights still

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On the other hand they're spinning this

Bank of England may look beyond jump in inflation

So, rabbits in headlights still

Yup. Balls summed it up with his remark that the bank will remain "vigilant." That means they will keep looking but not acting. My money is on a do nothing August meeting. Unless, of course, something dramatic intervenes such as a 10% drop in sterling or a Treasury leak on the true rate of inflation.

The stock market did almost nothing and the pound jumped a little. The Market seems to be yawning on the news.

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IMO this comment from Treasury is significant.

Outside of planned annual speeches, neither Balls nor Brown ever make comments about the economy/inflation [after all the BoE is 'independent' geddit?] unless they are planning something

More likely they're softening up for a movement in the Inflation Target. Talk tough for a while, then do the opposite - a fairly standard NuLabour method

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IMO this comment from Treasury is significant.

Outside of planned annual speeches, neither Balls nor Brown ever make comments about the economy/inflation [after all the BoE is 'independent' geddit?] unless they are planning something

More likely they're softening up for a movement in the Inflation Target. Talk tough for a while, then do the opposite - a fairly standard NuLabour method

Interesting. Although do you think GB can seriously get away with changing the inflation target? I've heard a few people discuss it, and mention GB would lose all credibility.

What do you all think?

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They are very unlikey to put up interest rates as this would have very little impact on inflation. If the current rise is the result of fuel costs rather than consumer spending then a rise in interest rates would badly damage the economy and would also have very little impact on inflation.

The alternative would be to reduce tax on fuel and encourage better use of new energy

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Guest Bart of Darkness
Interesting. Although do you think GB can seriously get away with changing the inflation target?
A FEW days later, when the terror caused by the executions had died down, some of the animals remembered-or thought they remembered-that the Sixth Commandment decreed "No animal shall kill any other animal." And though no one cared to mention it in the hearing of the pigs or the dogs, it was felt that the killings which had taken place did not square with this. Clover asked Benjamin to read her the Sixth Commandment, and when Benjamin, as usual, said that he refused to meddle in such matters, she fetched Muriel. Muriel read the Commandment for her. It ran: "No animal shall kill any other animal without cause." Somehow or other, the last two words had slipped out of the animals' memory. But they saw now that the Commandment had not been violated; for clearly there was good reason for killing the traitors who had leagued themselves with Snowball.

Animal Farm, Chapter 8

Afterwards Squealer made a round of the farm and set the animals' minds at rest. He assured them that the resolution against engaging in trade and using money had never been passed, or even suggested. It was pure imagination, probably traceable in the beginning to lies circulated by Snowball. A few animals still felt faintly doubtful, but Squealer asked them shrewdly, "Are you certain that this is not something that you have dreamed, comrades? Have you any record of such a resolution? Is it written down anywhere?" And since it was certainly true that nothing of the kind existed in writing, the animals were satisfied that they had been mistaken.

Animal Farm, Chapter 6

Go back to sleep Britain. Here's Big Brother and Love Island and Jordan on the front cover of The Star. Here's wall to wall soaps in the evening and World Cup hype to dull the senses.

Inselaffen indeed.

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If the current rise is the result of fuel costs rather than consumer spending then a rise in interest rates would badly damage the economy and would also have very little impact on inflation.

Uh, it would push up the pound against the dollar and reduce the cost of imported fuel.

On your basis we shouldn't give a crap about inflation at all, since it's primarily driven by cheap money from Japan. We have no control over that, but we do have control over the rate we devalue the pound relative to other currencies.

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We might get another quarter percent if we are lucky.

Money supply should be the measure of inflation, not CPI, RPI or anything else the government can fiddle. While money supply growth is around 10%, real interest rates are negative. Brown kills 2 birds with one stone, people think he is a miracle chancelor because house prices keep going up; and he erodes the debts he created. It wouldn't surprise me if they abolished money supply figures when people start to realise. In the end though, something's got to give but he'll proably be gone from no11 by then.

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Go back to sleep Britain. Here's Big Brother and Love Island and Jordan on the front cover of The Star. Here's wall to wall soaps in the evening and World Cup hype to dull the senses.

Inselaffen indeed.

Great post - and depressingly true

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Gordon Brown could'nt care less. He is blatently fiddling the figures, and like lemmings we are all believing him. HPI will gather pace, and the head-in-sand attitude of all the property tycoons :lol: will see a slippery demise. It won't take much to start it all a tumbling. Surely we must be getting to the point where we really can't afford for house prices to go much higher :huh:

I just can't understand why somebody would lumber themselves with a self-cert at ten times the salary. Mad, and as we have already seen, it is all down the the banks throwing mortgages at people who can ill-afford to see even a three percent increase in mortgage rate. Still, its got a few years to run yet, wot with Mummy & Daddy remortgaging to give little Cuthbert a sizeable deposit for his nice little two bed two bath pokey hole with cardboard walls and a service charge. Crazy people.

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RRI (Real Rate of Inflation) will take into account all those items which the majorioty of people use on a weekly basis:

1. Housing costs, mortgages and rent.

2. Gas & Electricity

3. Travel including train fares, bus and taxis

4. Council Taxes

5. Food items including meat, vegetables, cereal, tea and coffee

6. Clothing

7. Car expenses including license fees, insurance, maintenance

THus, if you take the median interpolant figure currently at -0.3% and multiply it by the seasonally adjusted extrapolater of 4.5 the median works out at roughtly C+Rmv (H+1/100) or the quantified total of the above multiples. If you then use the mix adjusted inflector rate which is currently +0.7 the multiplicand becomes slightly negative at -4. Add the rates for the mix and loss adjusted items for the last 2 quarters and eliminate both the mean and outside integers and you come up with a RRI of about 6%.

In other words, cutting through the BS, we all know that inflation is around 6% for the items we have to buy and use on a regular basis.

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Rates were reduced by one quarter last year right?

Why is there so much jazz hands around raising them back a quarter? Talk about the elephant in the room (precarious economy) if theres so much dithering and debate around it.

Basically raise a quarter point = recession.

No? then why the fuss.

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Gordon Brown could'nt care less. He is blatently fiddling the figures, and like lemmings we are all believing him. HPI will gather pace, and the head-in-sand attitude of all the property tycoons :lol: will see a slippery demise. It won't take much to start it all a tumbling. Surely we must be getting to the point where we really can't afford for house prices to go much higher :huh:

These crazy bubbles are always easy to spot due to the unusual lifestyles some people make around them.

In the tech stock bubble it was people quitting their jobs to day trade. This time it is people quitting their jobs to take on insane debt levels to become property developers or BTL landlords.

They will vanish soon enough, the party can only go on so long.

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I always think it would have been interesting to be around in October 1929 just before the Wall Street crash. On 20 October everything was rosy and the artificial boom looked set to continue indefinitely. By 29th October the entire world financial system had effectively collapsed followed by years of depression and falling asset/property prices!

It couldn't happen again surely?

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Guest Bart of Darkness

I always think it would have been interesting to be around in October 1929 just before the Wall Street crash. On 20 October everything was rosy and the artificial boom looked set to continue indefinitely. By 29th October the entire world financial system had effectively collapsed followed by years of depression and falling asset/property prices!

I've wondered myself what the atmosphere of those days immediately before the bust were like. No time for "doom mongers" and doubters back then, that's for sure.

Of course it couldn't happen again.

(Which is probably what people would have said before it happened the first time.)

USAwallst.jpg

Fred Bell was a wealthy businessman but was

forced to sell apples after the Wall Street Crash.

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the daily mirro my dad reads had a front page dedicated to a man who put down racing greyhounds.

-which is not a crime.

though an odd choiuce on a day when 2 more british soldiers got killed in afgahnistan and inflation rose 1/5th more than planned.

still. it was in colour.

and so far, despite the record hot july and drought, no one thinks to mention is it climate change caused.

nope- instead theres a lot and a LOT of pictures of the crowds on brighton beach.

the working class papers are full of celeb junk and the mainline ones are full of lies.

the independent tv channels are full of celeb junk and the mainline bbc are full of lies.

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  • 302 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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