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Britain has officially adopted Newmath. The increase in the cost of essentials is rising, which officially means that the cost of essentials is falling ;)

As you may have noticed, I am the Black Horse of the Apocalypse.

"And I beheld, and saw a black horse; and he that sat on him had a pair of scales in his hand.

And I heard a voice in the midst of the four beasts say, A measure of wheat for a penny, and three measures of barley for a penny; and see thou hurt not the oil and the wine."


"Look; Bankers! With a measuring device!

And I heard a voice say "I've balanced the cost of bread, which is rising, against luxury goods, which are falling."


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What, NEXT month again?

.......'fraid so, next month only 0.1% to drop out and all that food inflation will start to seep through which will lead to a greater increase than the 0.4% we had this month.

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Lest we forget most wage settlements are based on RPI not CPI, also as I recall, Merv and the BOE let slip sometime ago that they have little / no faith in the ONS data and collect their own. I wouldnt go pencilling in any rate cuts soon.

Didnt Merv indicate recently that he thought bailing out the reckeless would simply store up even mor etrouble for the future ?

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Personally I think this is a stroke of luck for the Bank of England.

There are some long-term inflationary pressures on the horizon, and the BoE is aware of them. If you look in their minutes, you'll see that they spend a lot of time talking about the future direction of employment and inflation, and don't just take a short-term view based on the current month's economic readings.

I believe that in the medium term - i.e. over the next few years - interest rates are going to have to rise. But right now, it may well be that the only way to sort out this mess in the banking sector is for the BoE to cut short-term rates. The country needs a robust banking system. The divergence of interbank rates from the Bank's base rate is a clear sign that the banks are learning their lesson, and starting to price risk appropriately.

A quarter-point cut this month might ease some of the stresses and help to return the system to normality. Given the goings-on of the past month or so, it would be ludicrous to believe that such a move was an attempt to re-inflate the credit bubble. That bubble is history. The loosening would not filter through to mortgage rates in any significant way. It would not be a repeat of the August 2005 scenario. It really is different this time.

Assuming Mervyn King remains in control at the Bank, I would not be surprised to see a 25 basis point cut either this month or next, accompanied by a stern statement explaining that this is a temporary and exceptional measure. That this does not set a new trend in the direction of interest rates. That rates are likely to return to 5.75% within a few months, when some order has returned to the credit markets.

This CPI reading gives the Bank a slim window of opportunity to sneak in a temporary rate cut, to help get the money markets back on their feet without too much risk of re-igniting the consumer credit forest-fire. On balance, it may well be the right thing for them to do.

Whilst I agree with you, it's how it looks to the man on the street. It will look just like 2005 again, albeit with slightly less effect on mortgage rates - it still will bring them down, as any drop in the base rate cheapens money.

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Has anyone got a simple list, with the things that are going up in price the fastest at the top, and those falling the fastest at the bottom.

Someone did this a while back, and it was great to print it off to show people. Then they can see everything that is going up in price is at the top, and luxury items are at the bottom.

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What is the point of them dropping it then?

I was a bit unclear there. What i should have said is that the markets are determining the rates at the moment due to the cost of credit rising for the banks. If the BoE does cut the rate by .25% but say market rates have themselves risen .5%, then effectively there is still a rise of .25% on the cost of borrowing.

Does that sound right?

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  • 338 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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