Monday, Jun 19, 2006

British Public not so concerned about inflation

TimesOnline: Rate rise threat recedes as Bank finds fears of inflation declining

The Bank of England (BoE) survey of the publics perception of inflation found that concerns about inflation are lower than they were three months ago. The current public perception is that inflation is around 2.5% down from 2.7% recorded in February. The BoE are supposed to be very interested in the publics perception as it can be a key driver in wage negotiations. The question is whether the figures of actual inflation i.e those produced by the Office of National Statisics (ONS) or public perception will drive Monetary Policy Committee (MPC) to adjust interest rates or is the survey of little consequence?

Posted by denzil @ 09:21 AM (667 views)
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1. Surfgatinho said...

"the CBI said that a rise in interest rates was not required, as inflation looked set to subside of its own accord and return to the Banks 2 per cent target in 2008."

Nice to see the CBI can predict the future. There is an awful, awful lot that could happen between now and 2008. Wage inflation in China, utility bill rises, Japan raising IRs, energy costs have plenty of room to rise again, commodities creeping up again.......
As for public perception, I'm sure I read something last week saying it was around 6%. Can you imagine how they carried ou this survey? Multiple choice?!

Monday, June 19, 2006 10:17AM Report Comment

2. Bfskinner said...

people perceptions are often wrong. wait untill people begin to feel the effects of energy price rises and council tax hikes. It seems that inflation may be on target for 2% but only after everything that is acutally increasing significantly in price has been removed from the index. I'm a public sector worker, after my 'inflation uplift' of about 2% this year, Im still (slightly)worse off than I was last year I reckon. Given my salary, the 2.5% barely covers all the extra expenses from higher costs of gas, electricity, petrol and council tax. The idea of low inflation is a myth. Im no ecconomist, but I can read a bank statement, the government and press releases donot tally with my day to day experiences.
although despite the promising headline, the best quote from this story was, I feel, the following

"Whether the Bank eventually will raise interest rates remains an open question, although a rise is still seen as more likely than a cut."

it comming. why prolong the agony, the longer they leve it the more painful the effect will be as the credit lemmings line up to take on more debt under the illusion of everylasting rate safety


Monday, June 19, 2006 10:41AM Report Comment

3. inbreda said...

Is it just me that thinks that the BoE should be targetting inflation rather than the opinion of the public which is so easily influenced by newspaper reports that con so often be bias or complete spin?

Who cares what non-experts think might happen in the future? What about the stats? Evidence? Reality?

The article quotes "The survey is closely watched by the Bank to see whether its rate moves and rhetoric are effective enough in communicating its commitment to keeping inflation steady.". By my understanding, this means that the BoE need to convince the public that they will control inflation. The BoE then do nothing at all to control inflation, so long as the public still believes that it will. Which it won't.

Monday, June 19, 2006 10:41AM Report Comment

4. tyrellcorporation said...

We live in an age where image and perception is everything. You must be seen to doing the right thing even if you're actually doing the complete opposite. Labour have turned it into an art-form and it is now seen as the norm throughout society.

Monday, June 19, 2006 10:47AM Report Comment

5. Waiting For The Crash said...

Call me stupid... Having been on holiday In Monte Carlo for a week watching CNN news the whole globe is talking about inflation....... but back in Blairist Socilaist Britain it is not mentioned? Except to say all is OK and that there is no problem. I have seen guys interviewed saying that the UK has a problem as it is now obvious that a rise to 4.75% could rock confidence and the housing market, we are in the S**T.
Back at my desk and timber has gone up 10% last week!.... and my competitors are awarding 5-6% pay rises??? Inflation steady as she goes at 2.2%?????!!!!!!!!!!
In the US they have cost saving tips 'TO BEET THE INFLATION COST OF FUEL?'

Back in the UK and I read how Mr Brown controls all members of the MPC not just 4! And that he is in charge of the ONS as well.............. and that is an independant bank? To quote Alan Sugar as sure as I have a hole in my arse this is a pack of cards waiting to fall down.

On the plane home got chatting to guy who was very wealthy.....what did he tell me that money is not safe except in the mattress and his family are moving to the S France.

Monday, June 19, 2006 10:51AM Report Comment

6. uncle tom said...

There is method in the madness - if the public think that inflation is marching ahead, those working in the service sector believe that price rises will be accepted. As the service sector amounts to two thirds of the economy, this counts for a lot.

As far as the BOE are concerned, this survey has proved quite a reliable early warning indicator in the past.

However, the big inflationary pressures at the moment are on the manufacturing/importation side, which does not greatly affect consumer sentiment.

The MPC need to take account of the bigger picture.

Monday, June 19, 2006 10:54AM Report Comment

7. Sebastian said...

I find it hard to believe that anyone seriously thinks inflation is that low. My wage has almost doubled in two years, am I any better off? I am still in the red at the end of every month...Where is this survey?

"The BoE then do nothing at all to control inflation, so long as the public still believes that it will. Which it won't."

Haha, scarily spot on.

Monday, June 19, 2006 10:57AM Report Comment

8. Abc said...

I agree with Tyrell. 'To be seen to be doing' something is now a common mantra throughout politics and business.

Monday, June 19, 2006 12:20PM Report Comment

9. jason said...

Just had a price increase of over 7% on Baxters soups. What on earth shall I do?

Price rises are coming thick and fast from manufacturers now. It's just a matter of time before retailers pass it on to the public.

Monday, June 19, 2006 12:26PM Report Comment

10. Geed said...

Dont get me wrong, I need house prices to reduce to realistic levels as I don't own a home but being a non-homeowner I make up a smaller percentage of the population, in essence "small fry". Apart from those who know better, watching the value of your home magically rise month upon month, year upon year must be nice thing to experience. So when in effect your asked "do you want the value of your home to start to reduce, or do you think your home is overvalued" it is quite obvious how most people will react.

Your average homeowner does not want their home to reduce in value and while owning or buying a home remains cheap (cost of borrowing), prices will remain high and probably, amazingly, climb even higher.

The current Government (BoE) will be forced to increase rate rises not on the say so of non-home owners but as Uncle Tom suggests, by commerce and industry.

As for the non-home owner in the UK, as long as we keep getting fed slurred inflationry figures in the media, I fear little will change.

Monday, June 19, 2006 01:13PM Report Comment

11. Paul said...

This is all part of the BofE's new targetting strategy that whenever the heat is raised on rates, the bank invokes the "la, la, la, I'm not listening proviso", and inflation is left to run amok, and the government is left claiming "there's no problem here, move along".

Monday, June 19, 2006 01:29PM Report Comment

12. Philmills said...

7% on you Baxters Soup !!!

Last Monday we received notification from our cable suppliers that, with immediate effect, all deliveries of cable (chinese manufactured) will rise by 80%.
Yep 80%, and the final insult is that all future orders will be on a 'price on application' basis.

It was obvious that sooner or later there would be a reverse in the downward trend of the cost of our materials/electronics. Take a look around our warehouse and you would be hard pushed to find anything that is manufactured in Britain, the majority from China and Eastern Europe. These products are now rising, greater than inflation, and it must be having a greater effect than indicated.

Monday, June 19, 2006 01:55PM Report Comment

13. Surfgatinho said...

So, when are they going to start making everything in Africa?

Monday, June 19, 2006 03:48PM Report Comment

14. Waiting For The Crash said...

manufacturing is in the throws of big price rises on materials and it needs sound fiscal judgement to steer us out the hole but instead we have the biggest joke of a government in years.
but i guess if you create the bubble you have to live in it till it bursts! i will only be happy when Mr Brown is shown up to be the biggest spender & waster of our national funds and economy that he is!
Any fool can spend 10 years wasting other peoples money and running up debts - it is a lot harder to sort it all out.

Monday, June 19, 2006 04:04PM Report Comment

15. bidin'matime said...

Phil - keep us posted.

Monday, June 19, 2006 08:21PM Report Comment

16. uncle tom said...


Those of us lags who have done very nicely out of importing Chinese goods have been looking around, but there's not much alternative.

South America holds out much greater promise than Africa, but neither is very encouraging. For most labour intensive production, China will still be competitive - even if their labour rates double.

The fundamental problem is that the developed world is running short of products to export to the developing nations, as those countries increasingly embrace hi-tech manufacturing. The only way that the imbalances in global trade can be corrected is for the currencies of the developed world to fall dramatically against those of of the rest of the world.

This will cause immense inflationary pressures in the developed world, that in turn will lead to much higher interest rates. The surge in commodity prices over the last couple of years is probably the beginning of this process.

Tuesday, June 20, 2006 09:58AM Report Comment

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