Panic over? Perhaps not...

TomTom

Thanks for those charts - feel better now. When I fill up the car it doesn't seem so bad after all. Food prices have just become really affordable and VAT doesn't seem so bad. I know gas and electricity prices will all seem relatively cheap when digested with some cheap whisky. It is marvellous how great it feels to live in the Bubble World of Government Statistics

normanc

No doubt a lot of work has gone into these figures, no doubt a lot too complicated for a simpleton like me to understand, but wouldn't it be simpler (and less expensive) for everyone to say 'We really have no idea what will happen, but trend inflation is 2% and trend interest rates are 5% so it's a fair bet that we'll converge on those values at some point in the next 5 years'.

I don't suppose you have a similar Citigroup & BoE graph from 2005 for the period 2005-10, or any other previous five year period? At least that would give us some indication as to whether or not they know what they're doing - my money being firmly on 'not'.

TrevorsDen

My grand daughter could have drawn the interest rate forecast graph.

Since the current forecast has proved wrong, why should we think future ones to be any better.
There is no wage inflation, no spending boom, to indicate the need to raise rates. The pressure is all on retailers to cut prices. Oil and other commodity prices are governed by external factors.

We must question why oil prices are so high given the recent world recession. Speculators again where is Harold Wilson when you need him.

michael

"perhaps not..." -Quango stats... Best wait for next quarters corrections.

Tiberius

Has Fraser shut himself away in his office this morning, Pete?

These numbers are evidence that raising rates in the short term would be a mistake. Those who advance rate rises now "as a precaution" should ask what it is we need to be cautious about. Killing growth is a much greater risk than higher inflation at present.

AJK

take a chill pill Peter. This is cost push inflation; not demand pull. The last thing we need now is demand being taken out of the economy. Raising interest rates won't cool commodity prices. We'll just have to accept higher inflation forma while. Pity that Osborne raised VAT. That didn't help with the inflation figures.

oldtimer

Prices are still going up, just not quite so fast as before. It is like cutting the the size of the deficit; the national debt still keeps on getting bigger and bigger. If you have to live on a fixed income or rely on interest on savings you will still be panicking.

YouCannotBeSerious!

Thank God the MPC has ignored the Spectator's hysterical calls for short-term interest rate increases. We need growth - and your proposed interest rate increase (how the hell will interest rate increases do anything to counter imported inflation anyway?!?) would kill it.

Chris lancashire

Tiberius has put it better than I can. Interest rate rises will kill off a nascent recovery and do absolutely nothing to slow international commodity price driven increases. Fraser is fighting last year's war.

Commentator

So perhaps all the inflation fanatics can remind us why an international investor would want to lend in Sterling and receive a rate of interest which fails to compensate for the decline in Sterling's purchasing power (which is what inflation is)? Do we or don't we need to borrow from the bond markets?

John Moss

Retails sales also plummetted in March, though partly because Easter was in March last year and not this.

I predict interest rates will be 0.5% until September, but you can trust that as much as my prediction for the National!

TomTom

"Do we or don't we need to borrow from the bond markets"

No. Most Gilts are held domestically thanks to QE, the Magic Money Machine

Pete Hoskin

TomTom: you do realise that I'm pointing out that inflation is still a problem, right?

Others: I'm more ambivalent than Fraser when it comes to whether rates should go up. Just pointing out facts above, is all.

Mr L

To me it is a moral issue. Nugatory interest rates penalise the prudent and encourage the profligate. WatO had a sensible interview with a couple who were being careful with their money because low interest rates mean they have less to spend. High inflation further penalises people like them.

yank

I see the Spectator chavs are still fighting the rear guard action, for their Cameroon chums.

The current inflation (and by inference the current stagflation) is all due to high interest rates, is it?

And relating the 2, inflation and interest rate, is enough to make that point, no matter what you follow on with, Mr. Hoskin.

Now, you could address stagflation directly, but they might just take away your Camerluvvie magic decoder ring, if you do. So apparently, Merv K is the devil... and that's that.

But make no mistake, stagflation will be addressed eventually, even if the Spectator chavs ignore it. If this government doesn't, there will be another one along soon.

Oh and by the way, once QE ends, you won't have to worry about making a "choice" to raise interest rates... they will be rising all on their lonesome. That's how markets work. And that rise will be a little (big?) adder to the stagflation rate, fyi.

You need to add the "s" word to your lexicon. Stagflation is your lot, and it's ridiculous that you're not addressing it.

TomTom

"TomTom: you do realise that I'm pointing out that inflation is still a problem, right?"

PH, my cynicism aside; I do realise you are saying just that. My cynicism is for the statistical representations of inflation which as even Germans say about their own SB in Wiesbaden, are far more subdued than the price rises actually being felt.

It does feel like being bombed as each new bill arrives and each source of income dries up

Barry Bilge

What would be better for the economy;

The current monthly uncertainty, and ongoing and quite tiresome wibble in the various media about why interest rates need to rise, fall or stay the same.

OR

For the MPC to say 'We're leaving rates at half a percent for the next X years' so the markets, businesses and consumers *know* what to expect and can plan for it. One less variable might make it easier to adapt to changing circumstances.

TonyG

Just a point but if you look at the monthly data the cause of the drop was the March 2010 monthly increase of 0,6% dropped off the index to be replaced by 0,3% for March 2011. That is still running at 4-4,5% annualised. Incidentally the April 2010 figure is also 0,6%. Thereafter it is 0,2%,0,1% and -0,2%. So CPI is probably going to fall next month and then accelerate. It is always worth looking at the figures before commenting!

Percy

Inflation fell and retail sales bombed because of at least one of the following:

1) It was/wasn't snowing/sunny/rainy
2) There was/wasn't an election/ world cup/ Easter/ royal wedding/ olympics
3) Christmas is only once a year
4) It's lambing season
5) Last Summer was a bit of a washout
6) etc etc etc

Justathought

"Is the inflation panic over?"

That's best addressed to Fraser as I don't know anyone one else who's panicking over this external commodity inflation.

There is turmoil in the oil producing countries , Japan's economy heads into recession, the US contemplates it 9 trillion deficit and cuts at home start to bite, Ireland and Greece face default, UK house prices finally adjust downwards, none of which will be resolved in the near future. Inflation is the least of our worries.

GDT

Just goes to show the Government is playing it right. Thank god GB is in America admitting his crimes against the UK and not still at the helm.

daniel maris

I sometimes feel that the Speccie commentators need to pick up an economics primer and have a look through it. If inflation has lessened its grip, I think that because of the continuing recession, pushing down prices despite the world cost push.

You lot are staying remarkably silent about the appalling news coming off the high street, the latest being the reported nearly 2% fall in sales in March. I will be v. surprised if we don't find we'd had another quarter of negative growth when the figures come out.

Let's face it, Osborne's policy and communications have been an asbolute disaster.

This government is going nowhere on the economic front.

Major Plonquer 1

TrevorsDen hit the nail on the head. 'Speculators again where is Harold Wilson when you need him.'

If Harold Wilson was alive today he'd be turning in his grave.

Percy

AJK

"Raising interest rates won't cool commodity prices."

Commodities are priced in dollars, if you have a stronger pound, you need less pounds to change into dollars to buy your commodities and they therefore become cheaper to you in pound terms.

Raising rates would strengthen the pound, I don't really understand your argument.

David Vinter

The poorest families are most affected by food and [if they have to drive to work, fuel prices]. Fuel the government can affect, but it would be a damn clever government that can know world wheat prices n the future. The weather keeps changing, and humans will keep on breeding,especially the poorest. Food commodity yields are especially difficult to forecast, hence erratic price changes!And often trouble.