Tuesday, Sep 12, 2006

BOE, doing too litttle, too late?

BBC News: UK inflation up to 2.5% in August

UK inflation accelerated to 2.5% in August, the fourth month in a row it has topped the government's 2% target.

Posted by kpjcomp @ 11:07 AM (564 views)
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1. george monsoon said...

Although I have no evidence to support my theory, I believe that the "official" measure of inflation (not the real measure which we all feel in our pockets as much higher!!) will grow at an alarming rate. Historicaly, inflation tends to increase exponentially unless checked at an early stage. I strongly believe that we are already way past the point at which it can be curbed quickly.

Hopefully this will stimulate some educated replies, probably a lot more informed than my own opinions, which are about 60% calculated, and 40% hope!

Tuesday, September 12, 2006 11:58AM Report Comment

2. Boarder said...

Inflation is M4. Market pricess are playing catch up with the dilution of the pound. There is plenty more inflation to come.

Tuesday, September 12, 2006 12:26PM Report Comment

3. inbreda said...

I've just read the guardian report of the same topic. It suggested that the MPC will want to keep inflation in check - what they are specifically worried about is the possibility of increased wage demands as a result of inflation.

It went on to say that the biggest contributor to the increase in inflation was bedroom furniture.

Now maybe I'm being a complete f****wit, but why would any sane person be worried that the population at large will start asking for unreasonable wage increases because the price of a bedside cabinet has gone upfrom 40 quid to 41 quid? Christ - even an increase from 40 quid to 400,000 quid is still irrelevant compared to the huge increase in the cost of property and petrol alone - two things that very few can do without.

On the (possibly naive?) assumption that the MPC are humans, is this just a smoke screen? Do they really expect us to beleive this nonsense?

Anyway, must dash because I need to tell my boss that I want an extra 50,000 a year because the small coffin I share with 15 friends is in dire need of a fitted wardrobe.

Tuesday, September 12, 2006 01:52PM Report Comment

4. george monsoon said...

Imbreda - I agree completely, especially the smokescreen. The government and all their affilate organisations use very sophisticated psychology to feed us the story they want us to believe. Unfortunately the majority of people in our green and pleasant land are very open to suggestion.

I would imagine that if it were possible to be a fly on the wall, at government meetings, it would not be disimilar to going into the kitchen of your favourite restraunt, only to find the chef scraping mold of your garlic bread and scratching his hand where the sun doesn't shine.

In other words, maybe ignorance is bliss afterall...

Tuesday, September 12, 2006 02:34PM Report Comment

5. Surfgatinho said...

I heard it was computer games and toys!
With reporting like this how are they going to explain to the general public that they are being crippled by higher interest rates because of the price of toys?!

Tuesday, September 12, 2006 05:38PM Report Comment

6. C'mon Correction said...

2.5% doesn't 'seem' true to me. And is this with the tuition fees now rising included? I can see the figure being massaged the next month or two downwards - due to oil price falling they will say - and some slower GDP and hey bingo no rate rise needed till next year. Cyncial but very possible with this government. I really do feel the spin on economic data, inflation, interest rates, house price reports, how wonderful BTL is, will just keep on-going until something 'forces the hand'. No news seems real anymore.

Tuesday, September 12, 2006 06:01PM Report Comment

7. rich said...

I'm completely agreed about the smokescreen too.

Public opinion seems like a massive factor in boom/bust economics, and the tool that is the base interest rate is rather blunt. I wouldn't blame the MPC for wanting to use suggestion to supplant rates, as long as it was in the best interests of the economy (not just property owners). It does seem a little bit random though.

I'm still hoping it's an attempt to avoid chaotic panic about inflation rather than an attempt to flog some shares in DFS.

Tuesday, September 12, 2006 06:13PM Report Comment

8. rich said...

Sorry... "supplant" in the post above should be "supplement".

Tuesday, September 12, 2006 06:14PM Report Comment

9. bidin'matime said...

"The Office for National Statistics said an increase in the price of computer games and toys in August had outweighed a decline in petrol prices and air fares. "

This is the impact of rising costs overseas and the struggle to maintain the level of the pound - another upward pressure on UK interest rates.

Tuesday, September 12, 2006 07:51PM Report Comment

10. Northernlad said...

Mmmmmmmmmmmmmmmm chinny chin chin! 2.5%..... what *hit!!!!!
WAKE UP AND SMELL THE COFFEE!!! They've highjacked the BBC and others with their 3200+ spin doctors!
We are all fed rubbish every day. When did you last see the Tories hit the top headline?

Tuesday, September 12, 2006 08:38PM Report Comment

11. autopilotengage said...

Even the massaged figures are rising; must be serious. The longer they sit on their hands the more pressure there will be to build profitable housing and the more willing the housebuilders will be to supply it. Bring it on, the greater the oversupply will be when market conditions change. Still don't know how likely that letter to our PM in the wing from Mervyn King is, another half percent before the MPC act is pushing it.

Tuesday, September 12, 2006 09:22PM Report Comment

12. uncle tom said...

The real story behind these figures (and, to some extent, the conspiracy theorists) is that for the last decade, many items in the index 'shopping basket' have been falling in price, thanks mainly to China, and their rapid improvement in the fields of quality and dependability. This has offset the rapid rise of most service industry prices.

The China syndrome (as in the deflation of the price of a wide range of manufactured goods) is now effectively over. The Chinese currency is now rising against western currencies, and my median estimate for the next year suggests a further growth of 10% - possibly much more. Chinese domestic inflation is also around the 4% mark, and wage inflation is well into double figures.

As an importer, I will be more than happy if I can restock for a cost increase of 10% next year - I may have to tackle much higher cost increments..

How does this map out?

Service industry costs are closely tied to labour costs, and there is little in the pipeline to suggest significant growth in efficiency - so one can expect these costs to grow by perhaps 4% p.a.

Manufacturing industry is highly dependant on imports, and domestic manufacturers are increasingly crippled by red tape. As a result, cost increases are likely to be much higher.

- So keeping inflation below 3% would seem a struggle indeed....

Tuesday, September 12, 2006 10:17PM Report Comment

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