UK inflation tipped for big fall

Generali

Sir_Humphrey wrote: »

But I have been reading on HPC websites that CPI was a con, and that RPI was the most accurate measure of inflation. My main cash ISA how has a positive real IR, just as my second 6.15% ISA bond matures. How's that for timing!

I agree about the RPI as it includes house buying costs which the CPI doesn't.

Of course both are averages. RPI includes cigarettes and beer which many don't consume for example.

As a rule of thumb, the older you are, the higher your personal rate of inflation has been as you buy more services and service costs generally rise in line with wages rather than goods as a whole.

purch

the older you are, the higher your personal rate of inflation

So the "scaremongers" must be right !!!!

I'm getting older by the day....so Inflation is rocketing ???

Generali

purch wrote: »

So the "scaremongers" must be right !!!!

I'm getting older by the day....so Inflation is rocketing ???

Not so far. RPI at 0.9% under a Labour Government, I never thought I'd see the day!

poppy10_2

Generali wrote: »

Not so far. RPI at 0.9% under a Labour Government, I never thought I'd see the day!

And predicted to go as low as -4.3%:

WTF?_2

mbga9pgf wrote: »

RPI is the fairest measure in my opinion.

Its interesting to see the effect of housing - RPIX is quite a lot higher.

RPI is a more fair indicator of inflation than CPI and it should have been used for inflation targetting instead of it - but CPI is important because it shows how consumer prices are going, as the name implies.

Looks like they way we are going, is towards a failing economy with deflation (or at least very low inflation) in the general monetary sense but consumer prices will on average be increasing still.

Stagflation in other words.

People are going to be hit at both ends by feeling the pinch financially as well as seeing the prices of essentials and desirable goods going up. i.e. Many people will be feeling a lot poorer.

Also, their debts aren't going to get any easier to service even with low interest rates, quite the opposite in fact as they find money harder to come by and have to pay more because of the cost of living.

Generali

poppy10 wrote: »

And predicted to go as low as -4.3%:

Amazing.

That'll cause a lot of problems to holders of contracts referring to the RPI. Do payments fall if the contract states, "...increase in line with RPI..." for example? The contract says increase quite clearly but also says in line with the RPI.

Does the Labour Government have the political balls to cut welfare payments in line with deflation?

poppy10_2

Clothing and footwear saves the day!
Oh, but wait. We import most of our clothing and footwear, so if Sterling has fallen through the floor, prices should be heading up.... o halp!

Sir_Humphrey

!!!!!!? wrote: »

Looks like they way we are going, is towards a failing economy with deflation (or at least very low inflation) in the general monetary sense but consumer prices will on average be increasing still.

Well some things may get a bit more pricey, some less so. If the sum of all that is that the stuff going down outweighs the stuff going up, then you get deflation. The stuff that could go up are imports, which as has been argued ad nauseum on these sites are not the important things in life. This is a benefit of the lower pound. You cannot have deflation and stagflation at the same time, they are mutually exclusive. All in all, savers benefit from this, without the need for any savings tax cut gimmicks.

Generali

Sir_Humphrey wrote: »

Well some things may get a bit more pricey, some less so. If the sum of all that is that the stuff going down outweighs the stuff going up, then you get deflation. The stuff that could go up are imports, which as has been argued ad nauseum on these sites are not the important things in life. This is a benefit of the lower pound. You cannot have deflation and stagflation at the same time, they are mutually exclusive. All in all, savers benefit from this, without the need for any savings tax cut gimmicks.

Most commodities are currently priced in USD.

Sir_Humphrey

Generali wrote: »

Most commodities are currently priced in USD.

Very true, but I would expect recession-linked further demand destruction to outweigh these effects, provided the pound does not fall too much more. The fall in the pound is a year and a half phenomenen now, but most commodities are much cheaper now than then in sterling terms. I should have thought that a lot of goods being manufactured right now have raw materials that were imported before the commodity price falls, so there may be lags.