September Inflation at 5.2%

Interesting! Now that will stop any interest rates reduction. Interest rates will be put on hold for the next 4 months until inflation is under control. The government target is 2% but we are in 5%.

formulaonefan wrote: »

Interesting! Now that will stop any interest rates reduction. Interest rates will be put on hold for the next 4 months until inflation is under control. The government target is 2% but we are in 5%.

I very much doubt it. The government will want to stimulate the economy and also try to lower the number of bad debts.

According to Channel 4 News last night, 45% of British mortgage debt is now with organisations under the control of the government. They now have a vested interest in making those mortgages much easier to service as bad debt would cost them a fortune (they are underwriting the banking system's debts now).

The prevailing idea is that deflation as a result of reduced economic activity will naturally bring inflation down all by its own. They seem to be ignoring the effect that a plunging pound will have on prices, irrespective of supply/demand considerations. If you're importing almost everything and your currency weakens, the stuff you import is going to cost you more - end of story.

There's such a huge balance of trade deficit that any gains made by exporters being more competitive won't come close to compensating for the sudden jump in the cost of imported goods and materials and with the financial services industry on the ropes and much of the remaining GDP made up from the retail/services sector which won't benefit from a weaker pound there's not a lot of hope that wages can rise to compensate.

Stagflation. People in general are going to get quite a bit poorer over the next 4-5 years, living standards will plummet. Unless of course the govt goes for all out money printing of course, which might give us a boom for 1-2 years before a total collapse.

Chris2685 wrote: »

I am pretty sure inflation is higher than that in reality!

It's miles higher (ok, I'd guess about twice as much for the typical person) but the figures are fiddled to give prominence to imported consumer goods from China which were deflating like mad, more than compensating (stats-wise) for inflation in other parts of the economy .. until recently.

The good news is that there's some hope for food and fuel not getting more expensive, maybe even slightly cheaper. But I think consumer goods are about to become much more expensive and credit harder to get - meaning big problems for the retail trade and lots of job losses there.

I'd guess we'll see some adjustment of what constitutes 'inflation'. Maybe the govt will now switch back to RPI as a benchmark since it looks like CPI is going to keep outstripping it. Of course they switched to CPI in the first place because it made the figures look a lot lower back then.......