Tuesday, January 19, 2010

Another ‘temporary spike’

Bank of England's 'nerves' to be tested as inflation jumps most on record

So when Mervyn King writes a letter next month to Alistair Darling blaming rising inflation on the price of stilettoes and Jupiter's orbit *again*, does anyone expect the Chancellor to say anything other than "Yes, very good, carry on"?

Posted by paul @ 02:21 PM (2436 views)
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19 thoughts on “Another ‘temporary spike’

  • 50% increase over last months figure. So 4.35% next month? If I were Alistair Darling I would be worried.

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  • got gold?

    I have. Don’t think Gordons got much though

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  • tyrellcorporation says:

    Unfortunately it’s not and never was Gordon’s gold.

    Regarding the inflation figure, does anyone think the BoE will act and we’ll see a rate rise before the GE or will Darling/Brown successfully pressure them not to? What I’m really asking is will the markets force a rate increase?

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  • tyrellcorporation – I personally dont think the BOE will act even though I expect Mr King will shortly be putting pen to paper on why CPI is 1% or more above the 2% target – the reason being they (BOE) think inflation will spike and then quickly fall back to acceptable levels (this along with political pressure). The markets seem to think a Conservative win is likely and that they will subsequently tackle the budget deficit etc.. and avoid a ratings downgrade – all very much on a knife edge IMHO as to whether the inevitable can be staved off to May or slightly beyond.

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  • I think mortgagees must be rather enjoying ‘Bailout Browns’ current policies and there’s rather alot of people benefiting from them.

    Makes me wonder if Conservatives will get in.

    Given we’ve devalued our currency by 20-30% against others and we’re net importers of most products, it amazes me that inflation isn’t much higher.

    Why does the BoE expect it to spike and fall I wonder ?

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  • @str 2007 – “Makes me wonder if Conservatives will get in” – A hung parliament is a distinct possibility and the markets wont react kindly to that !

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  • STR – whilst many no doubt are enjoying the current situation, surely most will realise that it could not continue whichever party wins.

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  • @8 “whilst many no doubt are enjoying the current situation, surely most will realise that it could not continue whichever party wins.”

    Do you honestly believe that?

    Most of the sheeple of no idea about their own financial affairs let alone the bigger picture, what really matters is who’s evicted from Big Brother or what’s happening in Eastenders.

    Oh, I forgot, the most important event this year is the football world cup, not the election and how the economy is managed.

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  • little professor says:

    This month’s figures were boosted by the fact that VAT was the same in December 2009 as it was in Dec 2008 – the first time that the 2.5% reduction in VAT did not figure. VAT was reduced in Dec 2008, and has been a downward force on inflation throughout 2009.
    Next month is the first month the the rise in VAT will figure, so expect an even bigger jump.
    Plus we don’t have the advantage of the dollar carry trade to mop up all the sterling we are madly printing.

    Time to pile into those index-linked savings, folks. Inflation is coming, in a big big way.

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  • tenyearstogetmymoneyback says:

    Mr G wrote “Most of the sheeple of no idea about their own financial affairs”

    Yes, but they might get upset when they find that a small bar of Kraft Chocolate costs £3.99.

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  • We’ve just bought a new hoover – vacuum cleaner – £26.99

    This is probably less than it would cost to buy and send a hose for the old one (that’s all that was wrong with it).

    I fear however this sort of bargain will vanish and the cost of goods will rise steadily as China takes control of manufacturing and raw materials.

    I think inflation is the direction, but perhaps not wage inflation. Tough times ahead.

    Jack C – yes I can never understand why people seem to back their side running upto an election rather than see what all parties have to offer and make an informed decision.

    666 – Sorry I’ll have to agree with Mr G on that one.

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  • Many angry Folk here tonight, the final nails in the HPC coffin perhaps?

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  • 20. smugdog said…

    the final nails in the HPC coffin perhaps?

    Possible.

    ….but keep it under your hat It’ll be amusing to watch the retards working out how useless a lump of osmium is, when the Barbarians are at the gate.

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  • ….but keep it under your hat It’ll be amusing to watch the retards working out how useless a lump of osmium is, when the Barbarians are at the gate.

    What exactly is your point?

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  • krustyatemyhamster says:

    Au contraire smugsie – I’m quite relaxed and looking forward to the imminent return of house price depreciation – happy times will be here again soon (either this month or next), well except for the prospect of low wage inflation, imported consumer price inflation, tax rises and increasing unemployment. The tide’s about to go out again and I hope you’re prepared, because I’ve no desire to see you naked.

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  • Very few people I know could properly explain or understand the wider effects of inflation. For this reason I don’t see inflation impacting house prices unless inflation forces us to go back to the ultra high interest rates of 20 years ago. I think the chances of this happening are about as high as the chance of house prices halving. the only bubbles here are the ones that the delusional ultra bears reside in to protect themselves from the hardships of reality.

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  • I’ve put off buying for 5 years, scraping together a deposit which is getting quickly eroded. If the inflation tsunami is about to hit, maybe now is the time for me to buy property (even if prices begin to drop)? I can’t see any government letting the profligate off the hook to save the sensible.

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  • @25 ” I can’t see any government letting the profligate off the hook to save the sensible.”

    That’s a genuinely interesting point.

    I’m sure they will try, but if the chips are down and we have rampant inflation and / or a currency crisis then the profligate will be hung out to dry.

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  • @micasasucasa.

    I can sympathise. We came off the ladder four years ago and watched the rises reverse and the credit crunch hit. We’ve been grateful for the falls in prices and a slight swing to a buyer market but I don’t see prices falling much further anytime soon. Prices seem fairly stable, employment figures are improving and the BoE won’t act anytime soon to raise interest rates at the risk of seting back economic recovery.

    We’re fed up living in a house that’s not a home. We made a tidy sum when we sold and we’re quite relaxed about absorbing some losses – we’ve never viewed what we made as profit, only as money to put back into a house when the time was right.

    Now we’re half way through the process of buying a home and, due to the changes in the market, means we can afford to change our lifestyles a little bit for the better. House prices seem reasonable (Central Scotland) to me. Many of our friends – who are either first time buyers or second timers with only a short while in the market – can comfortably afford a decent house. We got a good deal on a fixed rate mortgage with absolutely no problems or delays.

    The problem for those that already have a place and want to move on is finding a buyer – I think due to fear of unemployment and banks having tighter LTV rates. However employment news is encouraging and I see more banks starting to offer sensible 90% LTV deals. In time, I think first time buyers will be encouraged back.

    If you extend your “wait and see” approach you could end up waiting forever. Go on, leave the ramblng bears and doom-mongerers behind, if all you read was this blog you’d be forgiven for thinking the world was coming to an end. Take the plunge!

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