Sunday, August 16, 2015

Weak oil prices and the strength of the pound are expected to have kept inflation flat in the year

'No-flationÂ’ lowers the prospect of Bank of England interest rate rise

Britain came within touching distance of deflation again in July, increasing the likelihood that the Bank of England will postpone its first rate rise in more than eight years. (Read between the line, and given that eight years of 0.5% interest rates is not enough to get about 0% inflation, clearly, a rate cut is the only thing that will possibly cause inflation to rise). British Gas meanwhile has decided to slash tariffs 5%, with others expected to follow suit, so deflation should accelerate through the Autumn, noting that this co-incides with the end of the US driving season, so gas prices should also fall more than most anticipate.

Posted by libertas @ 05:19 PM (4588 views)
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2 thoughts on “Weak oil prices and the strength of the pound are expected to have kept inflation flat in the year

  • Actually, the effects of the commodities collapse are about to drop out of the inflation figures as it happened at the end of last summer. Naturally, some effects take longer to sink in (e.g. utility prices as they are based on longterm contracts and so fluctuate much less than the cost of the underlying energy), but most of the deflationary pressures appeared about a year ago.

    Btw, British Gas sells gas and electricity. US cars run on petrol/diesel like most cars. They just happen to call petrol and diesel gas. They’re different fuels. In any case, if the end of US driving season did affect the price of British Gas’s inputs, you would expect them to anticipate that because the end of US driving season, if there is such a thing, doesn’t sound like a particularly unexpected event.

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