Mervy Says Inflation Will Fall Sharply

[Doctor Gloom]

Has anyone posted this? Can't see it...

http://www.thisismoney.co.uk/news/article....mp;in_page_id=2

Mr King, who last week had to write his first open letter to Gordon Brown after Consumer Prices Index (CPI) inflation reached 3.1%, said the spike in inflation had been caused by rising energy prices.

He said: 'CPI inflation has risen but now expect it to fall back - this could be a sharp fall back over the next four to six months.'

Mr King was giving evidence to the Treasury Select Committee on the 10 years of the banks' monetary policy committee (MPC), which took control of interest rates in 1997. The MPC is charged with keeping inflation within a 1% range of the bank's 2% inflation target.

The governor added that the committee's outlook for inflation was little changed despite March's rise and said that the MPC had to 'look through the fog to the medium-term prospects'.

Brown knew it a few months ago, Kings saying it now, CPIs going down (shake that basket till it hurts!)

I see, he is predicting a sharp fall in inflation. Is he looking in the same crystal ball which predicted the massive surge in inflation in the first place. If that is so he could have headed it off rather than run the embarrasment of writing an explanation letter to our Gord.

I suspect this is government pressure in trying to make light of a bad situation anf keep a lid on it. Its so transparent it won't happen.

[theblacksheeple]

I may be mistaken here but were the BOE not originally saying that inflation would be back to target by summer..... Now they are estimating August to October.

Oh the Sun has got his hat on Hip Hip hooray

Oh the sun has got his hat on and inflations here to stay

[housesforcourses]

I saw the parliamentry meeting today where he states this and its not quite as bullish as thisismoney makes out. Whilst he thinks inflation will come down in the short term he acknowledged that things werent so clear in the medium term and agreed with much of the article in the Times (or was it Telegraph?) today on the comments on money supply. The BoE know inflationary pressures are mounting.

Edited April 24, 2007 by housesforcourses

[Ash4781]

hey, Merv will have a face like that when next month's inflation figures come out.

The governor added that the committee's outlook for inflation was little changed despite March's rise and said that the MPC had to 'look through the fog to the medium-term prospects'..

If you pull that face CPI looks like 2.1%

I'm sure before he said look at the data month on month and make a decision!

Now we're stumbling about in the fog!

Edited April 24, 2007 by Ash4781

[Rough Diamond]

What happens if CPI is still >3% next month? Will he have to write another letter?

6% by xmas

Who says energy pxs will fall anyway? Who knows what they are going to do? Face it, the upward pressures are domestic.

[jdc]

Who says energy pxs will fall anyway? Who knows what they are going to do? Face it, the upward pressures are domestic.

The markets. They'll roughly follow oil prices - down 15% in dollars and 25% in sterling on a year ago. Obviously they won't fall that much as electricity companies and petrol retailers will use it to skim some profit, but they certainly won't go up - it's a fairly competitive market.

Of course, oil might go up again for some reason we can't yet see, related to weather, politics or war, then all bets would be off. Nonetheless, if you genuinely believe CPI will be 6% by Christmas, I am happy to have a substantial spread bet with you. I think it will be just below 3, having fallen to around 2.4 and then gone back up again.

[BuyingBear]

Now we're stumbling about in the fog!

Me thinks there will be a summer haze at the ONS.

[Guest grumpy-old-man]

The markets. They'll roughly follow oil prices - down 15% in dollars and 25% in sterling on a year ago. Obviously they won't fall that much as electricity companies and petrol retailers will use it to skim some profit, but they certainly won't go up - it's a fairly competitive market.

Of course, oil might go up again for some reason we can't yet see, related to weather, politics or war, then all bets would be off. Nonetheless, if you genuinely believe CPI will be 6% by Christmas, I am happy to have a substantial spread bet with you. I think it will be just below 3, having fallen to around 2.4 and then gone back up again.

do you have one of these

[otters]

Merv has to say that, could you imagine the state of the stock market tomorrow if he said, "****ing hell help me someone, I thought I had it all under control but it would appear I've had my head up my ar$e".

He has had his head well above the paraphet for a long time, he just knows noboby is going to shoot at him.

Yet.

[Guest Charlie The Tramp]

It`s that Global Inflation Monster you have to watch out for and those rascals on seeing inflation in the system use it to make that little bit extra.( we`re not talking Tesco here )

As in 1972 when Barber`s Boom let it out of the bottle it took over 20 years to re-cork it.

[Rough Diamond]

The markets. They'll roughly follow oil prices - down 15% in dollars and 25% in sterling on a year ago. Obviously they won't fall that much as electricity companies and petrol retailers will use it to skim some profit, but they certainly won't go up - it's a fairly competitive market.

Of course, oil might go up again for some reason we can't yet see, related to weather, politics or war, then all bets would be off. Nonetheless, if you genuinely believe CPI will be 6% by Christmas, I am happy to have a substantial spread bet with you. I think it will be just below 3, having fallen to around 2.4 and then gone back up again.

Sorry, I meant interest rates at 6%. Not CPI! That would be something.

Three points jdc: Surely you are making a massive assumption when you say that oil "certainly won't go up" (unless related to weather, politics or war). But how can you assume that there won't be any bad weather, political changes or war? In fact it's probably more likely than not. My point was that it is impossible to predict these things.

Secondly, although Merv has quoted energy prices as pushing up CPI, wasn't it also driven also by domestic prices not affected by energy?

Thirdly, what's the point in having a bet with me about inflation when not even Mervyn King could predict the 3.1 figure. Otherwise they would have raised interest rates more in previous months.

[jdc]

Sorry, I meant interest rates at 6%. Not CPI! That would be something.

Three points jdc: Surely you are making a massive assumption when you say that oil "certainly won't go up" (unless related to weather, politics or war). But how can you assume that there won't be any bad weather, political changes or war? In fact it's probably more likely than not. My point was that it is impossible to predict these things.

Secondly, although Merv has quoted energy prices as pushing up CPI, wasn't it also driven also by domestic prices not affected by energy?

Thirdly, what's the point in having a bet with me about inflation when not even Mervyn King could predict the 3.1 figure. Otherwise they would have raised interest rates more in previous months.

Fair enough. For what it's worth while (with reasonable savings and 0 debts) I'd like to see 6% interest rates, I anticipate two .25% increases to 5.75% and then sticking there for some time.

1) I'm making a bit of an assumption - oil might go up a bit, but I was talking about energy prices. For them to go up over the next few month oil would have to go up by over 25% very soon. I don't see it.

2) Yes, of course there are other things, but actually they mostly are affected by energy too - furniture prices are furniture, but they're affected by the cost of making them in an electric factory, the cost of driving them to the shop, and the cost of lighting the showroom.

3) I wouldn't bet with someone on .5% either way, but when I thought you were forecasting 6%, I'd be happy to have a bet on that basis!

Edited April 24, 2007 by jdc

[BuyingBear]

Fair enough. For what it's worth while (with reasonable savings and 0 debts) I'd like to see 6% interest rates, I anticipate two .25% increases to 5.75% and then sticking there for some time.

5.75% is certainly priced in, the December contract for Short Sterling is 5.88% so odds slightly favour a potential 6% move.

[Johnny Cash]

Has anyone posted this? Can't see it...

http://www.thisismoney.co.uk/news/article....mp;in_page_id=2

Mr King, who last week had to write his first open letter to Gordon Brown after Consumer Prices Index (CPI) inflation reached 3.1%, said the spike in inflation had been caused by rising energy prices.

He said: 'CPI inflation has risen now expect it to fall back - this could be a sharp fall back over the next four to six months.'

Mr King was giving evidence to the Treasury Select Committee on the 10 years of the banks' monetary policy committee (MPC), which took control of interest rates in 1997. The MPC is charged with keeping inflation within a 1% range of the bank's 2% inflation target.

The governor added that the committee's outlook for inflation was little changed despite March's rise and said that the MPC had to 'look through the fog to the medium-term prospects'.

Brown knew it a few months ago, Kings saying it now, CPIs going down (shake that basket till it hurts!)

He has to say that.

Its all about managing the expectation of inflation.

Got to do all they can to spike the guns of the public sector unions, dont you know?

Edited April 24, 2007 by Johnny Cash

[deano]

If you watched the select commitee yesterday you will have heard his explanation. He has said that the recent fall in gas and oil wholesale price will feed through later this year bringing inflation back on target.

Dont hold your breath, utillities only know one way when making price adjustments and thats not down.

[Jason]

What happens if CPI is still >3% next month? Will he have to write another letter?

The MPC has 3 months of over target CPI before they have to write another letter.

Edited April 25, 2007 by Jason

[Gtr London FTB]

From The Times this morning:

Bank Governor hits back at criticism over inflation

http://business.timesonline.co.uk/tol/busi...icle1701419.ece

[Realistbear]

http://www.telegraph.co.uk/money/main.jhtm...25/cnking25.xml

King says BoE not to blame for inflation

By Ambrose Evans-Pritchard

Last Updated: 1:04am BST 25/04/2007

Mervyn King, the Governor of the Bank of England, has defended the bank's inflation policies against a barrage of criticism from economists and denied that surging growth in the money supply is the central cause of Britain's frothy economy.

Mr King, appearing before the Commons Treasury committee, said the main driver behind the property and stock boom has been the flood of global liquidity.

Now comes the finger pointing. No clearer sign that Gordon's HPI-MEW miracle is O V E R. Finito. Done. Terminated.

Should Merv carry the blame? Yes. If he didn't like what Gordon was doing he should have resigned. No Nuremberg defence for poor old Merv. I would have done so in August 2005 when the BoE dropped rates.

[Realistbear]

Oil at $68 today. Merv said energy prices would fall back and reduce inflation.

Nuff said.

[OnlyMe]

Should Merv carry the blame? Yes. If he didn't like what Gordon was doing he should have resigned. No Nuremberg defence for poor old Merv. I would have done so in August 2005 when the BoE dropped rates.

Bang on the money!

[planit]

I still dont see any media comment about the WEEE directive

Everyone on this site keeps banging on about DVD players going down in value

But as far as I know on July the 1st all electrical items are going to go up in price as the manufacturers have to start paying for the recycling process.

People are talking about 3% increases so what must be the effect on the CPI figures if there is a universal increase on the same day. King must know about this?

Unless the government are intending to take out the 'recycling component' of the cost of these goods which would be very dishonest.

[BuyingBear]

I still dont see any media comment about the WEEE directive

Everyone on this site keeps banging on about DVD players going down in value

But as far as I know on July the 1st all electrical items are going to go up in price as the manufacturers have to start paying for the recycling process.

People are talking about 3% increases so what must be the effect on the CPI figures if there is a universal increase on the same day. King must know about this?

Unless the government are intending to take out the 'recycling component' of the cost of these goods which would be very dishonest.

The WEEE "entitlement" will be hedonically adjusted as increased 'value added' for the consumer.

Edited April 25, 2007 by BuyingBear

[jdc]

Oil at $68 today. Merv said energy prices would fall back and reduce inflation.

Nuff said.

So oil costs £34 a barrel. A year ago it was at $75, which was then £42.

It's fallen by 20%

[crashmonitor]

Oil at $68 today. Merv said energy prices would fall back and reduce inflation.

Nuff said.

Yep,exactly the position of one year ago.Merv was hoping for deflation to mask his f**k ups of the past.He is now counting on it sticking or falling,which will bring it back into deflationary territory;last year it continued to climb a further $10 into the summer

[thedebtisreal]

OK. Three things.

1) Core inflation has surged. Everyone keeps banging on about food and energy. It doesn't matter, everything is rising in price because of inflation expectations.

2) Mervyn said last week "The MPC must ensure that inflation expectations are anchored on the 2% target. It is importnat to prevent that anchor from dragging." Why do you think he is always making these falling inflation predictions?

3) Inflation is approx 10% in China. Does no one suspect this is now feeding through?

We are now entering a period of higher consumer prices, higher interest rates and lower asset prices. A triple whammy for homeowners.