Optobear Posted December 1, 2007 Share Posted December 1, 2007 Just a thought, what is the effect of targetting CPI rather than RPI if prices fall? CPI excludes the major owner occupier costs compared to RPI. So targetting CPI inflation didn't prevent House price inflation - because it wasn't in the figures. If prices start to fall, that won't figure either. So CPI could be 3% if food, oil, etc rise, and the BoE would have to raise rates further and further during a period of significant recession. Walking away from the 2% CPI target would be very politically damaging for this Prime Minister... Ooh, I better they never thought that far ahead when choosing to ignore high prices by targetting CPI instead of RPI. Funny how things work out... sorry Gordon, Tony got the benefits, you will take the flak! Quote Link to comment Share on other sites More sharing options...
microbe Posted December 1, 2007 Share Posted December 1, 2007 Funny how things work out... sorry Gordon, Tony got the benefits, you will take the flak! Slimey **** timed it well. Bet he knew very well that things were about to get messy. Quote Link to comment Share on other sites More sharing options...
integral Posted December 1, 2007 Share Posted December 1, 2007 they'll do whatever they want - most sheepie wouldn't notice anyway... Quote Link to comment Share on other sites More sharing options...
crashmonitor Posted December 1, 2007 Share Posted December 1, 2007 Walking away from the 2% CPI target would be very politically damaging for this Prime Minister... Not really it is the MPC who are responsible for tracking the target.The latest thinking is that yes CPI will rise to 3% plus this spring but will fall dramatically in the medium term and it is a medium term target.This medium term excuse always comes out,as in 2005 when the housing market was slumping.And if inflation stays over target for months ,as before,they will pretend it was a miscalculation not ''walking away'' the B*****ds. Quote Link to comment Share on other sites More sharing options...
Ash4781 Posted December 1, 2007 Share Posted December 1, 2007 Not really it is the MPC who are responsible for tracking the target.The latest thinking is that yes CPI will rise to 3% plus this spring but will fall dramatically in the medium term and it is a medium term target.This medium term excuse always comes out,as in 2005 when the housing market was slumping.And if inflation stays over target for months ,as before,they will pretend it was a miscalculation not ''walking away'' the B*****ds. At the current CPI / RPI spread that would put RPI at around 5% ( http://www.statistics.gov.uk/cci/nugget.asp?id=19 ) Expect blackouts and three day working weeks Quote Link to comment Share on other sites More sharing options...
Bloo Loo Posted December 1, 2007 Share Posted December 1, 2007 Not really it is the MPC who are responsible for tracking the target.The latest thinking is that yes CPI will rise to 3% plus this spring but will fall dramatically in the medium term and it is a medium term target.This medium term excuse always comes out,as in 2005 when the housing market was slumping.And if inflation stays over target for months ,as before,they will pretend it was a miscalculation not ''walking away'' the B*****ds. Its the government that sets the target, If they wanted to relax, they could, the BoE would just adjust to the new target. Quote Link to comment Share on other sites More sharing options...
oracle Posted December 1, 2007 Share Posted December 1, 2007 (edited) they'll do whatever they want - most sheepie wouldn't notice anyway... to right. That's why they will get cameron in saying something to the effect of CPI is a lie...turn the sheeple on the government as the houseprices come down.This leaves labour with no option but to inflate wages like the 70's(with comparable public sector strikes) or concede defeat in the next election. People know full well that the mortgage rates/food/bills and so on ARE rising fast.What they don't reckon on is the next piece of sleight of hand to bring in a new deflator under the auspices of being a "fairer" measurement. Personally I wish the police would just impeach the whole lot of them and lock em up without parole. I'll personally organise a whip round for the weekly bar of soap they need for "showertime" they've spent so much time butt-******ing the public it's about time they had a taste of being on the receiving end!! Edited December 1, 2007 by oracle Quote Link to comment Share on other sites More sharing options...
Optobear Posted December 1, 2007 Author Share Posted December 1, 2007 At the current CPI / RPI spread that would put RPI at around 5% ( http://www.statistics.gov.uk/cci/nugget.asp?id=19 )Expect blackouts and three day working weeks Doesn't RPI contain mortgage costs? I can imagine RPI falling below CPI. That would really leave Brown strung out. Quote Link to comment Share on other sites More sharing options...
microbe Posted December 2, 2007 Share Posted December 2, 2007 Doesn't RPI contain mortgage costs? I can imagine RPI falling below CPI. That would really leave Brown strung out. There is RPI, RPIX and RPIY, only the first includes mortgage costs. Depends which one we are talking about. All Items Retail Prices Index excluding Mortgage Interest Payments (RPIX) Table (RPIX) back to June 1975. Also known as the 'Underlying rate of inflation'. Quote Link to comment Share on other sites More sharing options...
bobdylan Posted December 2, 2007 Share Posted December 2, 2007 Just a thought, what is the effect of targetting CPI rather than RPI if prices fall? CPI excludes the major owner occupier costs compared to RPI. So targetting CPI inflation didn't prevent House price inflation - because it wasn't in the figures. If prices start to fall, that won't figure either. As house prices start to fall, the line will be: 1. House prices went too high because interest rates were too low. 2. Interest rates were too low because CPI was flawed, because it didn't include house prices. 3. We must now put house prices into CPI, so we can avoid this problem in future. Thereby killing two birds with one stone - an excuse for the old problem (CPI was flawed) and a solution to the new problem (keeping CPI down in the face of rising food, fuel etc) Quote Link to comment Share on other sites More sharing options...
red Posted December 2, 2007 Share Posted December 2, 2007 As house prices start to fall, the line will be:1. House prices went too high because interest rates were too low. 2. Interest rates were too low because CPI was flawed, because it didn't include house prices. 3. We must now put house prices into CPI, so we can avoid this problem in future. Thereby killing two birds with one stone - an excuse for the old problem (CPI was flawed) and a solution to the new problem (keeping CPI down in the face of rising food, fuel etc) Agreed. Anything deflationary will miraculously appear in the basket - including house prices. Will it save the market, though? Quote Link to comment Share on other sites More sharing options...
Optobear Posted December 2, 2007 Author Share Posted December 2, 2007 There is RPI, RPIX and RPIY, only the first includes mortgage costs. Depends which one we are talking about.All Items Retail Prices Index excluding Mortgage Interest Payments (RPIX) Table (RPIX) back to June 1975. Also known as the 'Underlying rate of inflation'. I meant the first one. Anyway, actually mortgage costs will rise if inflation means the BoE need to raise rates. The value of the equity is excluded in all variants of RPI I think? Quote Link to comment Share on other sites More sharing options...
ManorHouseOwner Posted December 2, 2007 Share Posted December 2, 2007 Keep it simple chaps. The government is f*****d. Quote Link to comment Share on other sites More sharing options...
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