Inflation down, but the squeeze goes on
Peter Hoskin 10:39amHas Mervyn King's downwards trend in inflation, promised for over a year now, finally arrived? After all, going by today's figures, inflation has now dropped for two months running. CPI inflation is at 4.8 per cent, and RPI is at 5.2 per cent. What's more, we can expect them to fall even further once the effect the VAT rise is removed in January:
But I wouldn't get too excited just yet, CoffeeHousers. Sure, most forecasters have inflation going down from here into the foreseeable future — but, don't forgot, we're still being subjected to pretty high inflation, with CPI over double its target level. And, crucially, even by the OBR's forecasts, inflation is set to outpace wages until at least the end of next year. So, as far as our pocket books are concerned, the squeeze goes on:
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telemachus'
December 13th, 2011 11:06am Report this commentYes but with the economic loneliness from last Friday it will shoot up again
The rate was being brought down by our European partners before disconnection
Cameron will rue the day
TomTom
December 13th, 2011 11:08am Report this commentInflation is a RATE of INCREASE which raises the Price Level and devalues Savings. If the measured rate falls it still requires DEFLATION to reduce the Price Level and restore the value of Savings.
Olaf
December 13th, 2011 11:09am Report this commentEven if inflation dropped to zero the squeeze won't get any easy it just won't be any worse.
So it will remain bad until wages start to rise again.
Richard Spain
December 13th, 2011 11:27am Report this commentThe headlines are designed to deceive us into thinking that a drop in inflation means that prices are going down. They must think that we are pretty stupid.
normanc
December 13th, 2011 11:46am Report this commentQuick, fire up the presses!
Sean Haffey
December 13th, 2011 11:54am Report this comment>telemachus
What are you smoking? The pound is strengthening against the Euro (1.18 = £1 as I write this) and this on its own will help bring down inflation.
European politicians will try desperately to blame the UK and banking for their self-inflicted troubles, but you'd be crazy to believe them.
Alex R
December 13th, 2011 11:57am Report this commentPete,
You constantly make this point, but never suggest a solution...To what level would you have interest rates raised to?
TrevorsDen
December 13th, 2011 12:13pm Report this commentA run on the Euro will mean a rise in the pound and a further downward pressure on inflation.
The fall out from Friday is that the Euro problem is still miles away from a solution and a break up of the Eurozone still likely.
Holly ......
December 13th, 2011 12:38pm Report this commenttelemachus'.11.06.
Want to see 'loneliness'?
Check out guido's blog on China & Europe.
Having a currency crisis is fundamentally isolating...
A post on here about it and any implications
would be a nice thing.
michael
December 13th, 2011 1:46pm Report this commentWhy is everyone so scared of deflation?
Having spent the last twenty years buying Chinese, we are all aware that the bulk of our purchases instantly become relatively worthless the moment we retrieve our plastic.
disenfranchised
December 13th, 2011 1:50pm Report this commentinflation's not down. creative accounting's up. simples.....
Dimoto
December 13th, 2011 5:57pm Report this commentPeter Hoskin presumably cribbed this from the Today programme this a.m. where, after anticipating that "headline inflation" would fall, they explained that actually, it would rise.
To convince the innocent listener, they wheeled on some west-country builder, who said "yes Gov, the price of bricks 'n tiles is going through the roof Gov" (and I need a small increase on the price Gov).
Must be the massive building boom currently sweeping the UK, mustn't it ?
TomTom
December 13th, 2011 6:16pm Report this comment"A run on the Euro will mean a rise in the pound and a further downward pressure on inflation."
No, it will mean 180 Billion EURO in New York Banks holding of Euro Debt will be at risk. Already 20% Greek Bank Deposits have gone AWOL. 5390 British Private Pension Funds are under water because of ZIRP.
Cross-collateralisation means everything is suspended in mid-air over a cliff face waiting to collapse. Sterling is irrelevant since most of its Bonds are bought by British Banks and Pension Funds with money created by the Bank of England and Pension Funds are going to have to renege on pension pledges because they cannot get the returns
Forlornehope
December 14th, 2011 12:23pm Report this commentRemember, what brings debt down as a percentage is the growth of nominal GDP (that's real growth plus inflation). Osborne's delighted by this level of inflation; it makes his job much easier. However, he's far too canny to admit it.
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