Tuesday, May 17, 2011

King virtually asks for wage restraint as inflation figures approach tipping point

Inflation could go higher if workers demand pay increases, Mervyn King warns

I imagine the cat will be out of the bag if inflation figures of 5% (RPI or CPI) or over are seen next month. The man with thick glasses comes up with some good quotes in the article like, 'resistance to the erosion of real take-home pay', and 'volatility in energy and commodity prices makes it difficult to be sure when inflation will return to the target'. Chuck in the comment at the end about any interest rate rises being 'the straw that breaks the camel's back' and it must be obvious to all that there is only one way this will go.

Posted by enuii @ 06:48 PM (1763 views)
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8 thoughts on “King virtually asks for wage restraint as inflation figures approach tipping point

  • The temerity of the man.

    Keep that rhetoric up Merv and you will be receiving letters.

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  • general congreve says:

    In Merv’s recent open letter to Osbourne he blames inflation on rising import costs.

    It beggars belief, just why are import costs rising Merv? Oh, because you printed up a load of money and devalued the pound.


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  • ive now heard everything

    raising interest rates will lead some to higher mortgage costs, so these people will seek wage increases causing inflation.

    never in the field of economics has so much bull been said in the space of one sentence

    mr.philpott (or whatever his name is) at the CIPD should be struck off whatever clown professional body he resides upon

    so now it seems totally clear that the way to cause inflation is via interest rate rises. better go re-write all those economics books that have been teaching people differently all this time.

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  • I’m quite sad at the way things are going (or the prognosis) for this country. If Merv continues down this road, things just get worse. Print more money, devalue more and collect the inflation. Meanwhile unemployment keeps wage rises down, bankers and speculators pay goes up and a Victorian divide opens up.

    Looking forward, in a year, Merv retires on a big inflation linked pension and joins the lecture circuit – the rest of the “little people” get shafted. The ones he’s hypocritically trying to shelter…. Oh dear!

    Finger down throat.

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  • Cynically I think merv knows the only solution is runaway inflation. I just don’t expect it to be this one sided.

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  • 2. alan

    There’s lots of other Mervs that could take his place.

    The Bush and Obama swap being an outstandingly good example.

    The same administration and people still didn’t get it. Love is blind.

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  • A very long time ago on this site, I explained why 5% inflation would provide a much easier way out of the debt crisis than 2%. Danny boy subsequently came out and made the same argument.

    Re-setting the inflation target to 5% would be an entirely rational and prudent thing to do, given the nation’s current circumstances; but the gap between bank rate and inflation needs to be steadily narrowed if the policy is to maintain credibiity.

    Fear of redundancy is likely to curb wage demands for now, but that won’t last forever..

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  • ontheotherhand says:

    I hate the inflation too, but we’re going to be moaning about it for years because it is inevitably the choice of politicians. If the economy was on a path to growth then they could possibly grow their way out of it but cutting public spending as a share of the economy. But seeing as we’re likely to have another recession, what levers do they have left to pull?
    Cut interest rates and manipulate rates down with QE? No more room to do more.
    Go on a Keynsian spending splurge? No more ability to increase the rate of borrowing.
    Inflate away the debt and devalue the pound? Bingo. It’s the only ‘policy’ that stupid voters will digest.

    UT, one doesn’t up the target to 5% because the population will instantly get 5% pay rises baked into their contracts. To steal off them (and government bond holders) until they wake up, you pretend you are going after an inflation target of 2% for as long as the idiots swallow it. Personally I wave the Tax and Price Index (TPI) number in front of my boss which shows I need to earn 5.8% more just to stay still.

    If we all put our affairs in order to benefit from persistent ‘unexpected’ inflation, then perhaps we would all cheer every number here on HPC.

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