john banks

Merv will have to write a letter to the bloated one to explain why his miracle economy is going out of control.

BOE base rate is only 0.45% above RPI. Makes it quite pointless to save

Iwan

The letter is apparently being released any minute, the pound has got even stronger on this news - further hurting manufacturing and exports.

john banks

http://www.bankofengland.co.uk/monet...tter070417.pdf

http://www.hm-treasury.gov.uk/media/...nse_170407.pdf

Sounds like the bloated one is being rather self congratulatory at this failure.

borat52

Makes me laugh, the gov of the BofE sites crude oil prices and energy prices as cause for the inflation.

When you break it down CPI is measured year on year every month. Now as crude oil is always sold in dollars in order for the UK refinaries to buy it they must buy it in dollars. 1 year ago this month crude was about $65 a barrel, and the exchange rate was £1:$1.77, so a barrel of crude cost £36. as of now a barrel of crude is about $64 and the exchange rate is £1:$2 so a barrel of crude is now £32, about 11% cheaper than this time last year.

So if crude is cheaper for the UK year on year (and the same goes for gas/other energies) then why is inflation going up? (couldn't be the huge tax rises or housing boom feeding through by any chance?)

lozgti

Does Gordon Brown use a felt tip pen by the look of things.

Anyway,it looks like fun ahead.Just the May elections as the icing on the cake hopefully

Petem95

Very good point - its just that there is far more underlying inflation that just oil prices going up.

One thing that keeps the figure 'low' is that things like imported goods (mainly from China) are included in the calculation to keep things looking low. These things have been getting cheaper and cheaper for some time, and as these things are priced in US$ they've been getting cheaper faster because the UK£ has been climbing against the dollar.

But the prices of imported goods is apparently starting to take a turn - obviously as China develops costs will rise, and export prices increase. This will have a knock-on effect by nolonger pulling down our inflation figures, so they'll start picking up even more.

Oil prices have recently gone up, but had been down significantly over the last 6 months, yet inflation was still rising...

I would be amazed if rates arent over 6% by the end of the year - they've been way too low for too long!

swampster

iTrader: (1)

I didn't think oil or other energy sources for that matter were included in the CPI index but are included in the RPI?

fast bloke

Oil isn't included in CPI, but fuel heating etc is. Pete - The figures are based on the a 12 month comparison, so you really need to compare prices now against prices last March. Prices 6 months ago do not have any real bearing on either the monthly or annual change

alcazar

iTrader: (2)

What makes me laugh is the usual Lying Labour "Not me, guv" attitude:

The scrufy scots pension thief puts extra tax on fuel, then SOMEONE ELSE has to write to him expalining why inflation is rising

Not that he'll take any notice, just like he didn't when he was warned ten years ago on the effect of robbing the pension funds

Alcazar

john banks

If they increase rates enough to bring down inflation surely they'll need quite a rise to accomplish that since so far they're behind the curve with RPI and CPI increasing far quicker than interest rates?

Or they sit on their hands and leave rates low whilst inflation runs out of control?

Surely both outcomes are quite nasty? If inflation runs out of control it will erode a lot of the debt mountain but the currency will be worthless?

fast bloke

If they do increse rates substantially, the increase in mortgage payments will push up RPI anyway. If they don't increase it, house prices will continue to increase. people will borrow more to spend, pushing up RPI and CPI. It seems they have lost control. The only real hope they have of recovering without knackering the economy is that people will be afraid of a massive hike in rates, so will reign in their spending. With a bit of luck Gordo will stop increasing taxes on everything, which is probably one of the major factors anyway. Alternatively, they could introduce a new index which doesn't include anything that looks expensive..... hang on - they have done that already

borat52

WEll maybe people will finally realise that the £20k a year they have been taking out of their homes in equity withdraw was not actually "free". Come house price crash or rampant inflation at least houses will become affordable again and the poor sods who work hard but have not yet got a house will finally be able to live in a place they actually own. Its the people who did not vote these charlies in but have had to endure not being able to buy a house and breaking their back to pay their taxes that I feel for, not the buy to letters who will end up selling all of their homes and still be hundreds of thousands in debt with negative equity, but hey, 'you cant go wrong with property'