Bank of England's 'nerves' to be tested as inflation jumps most on record

Thrugelmir

ses6jwg wrote: »

Just moved half my instant access savings into Index Linked Certs.

What's the NSI currently offering?

ses6jwg

Thrugelmir wrote: »

What's the NSI currently offering?

RPI + 1%

So currently 3.4% I believe, tax free.

But you have to hold them for at least 1 year and ideally to full term (3 or 5 years)

phil_b_2

carolt wrote: »

What about it?

Why the hell did it end at 12.07pm?

Since when is some of the dross that's been posted on here in the last 10 hours of greater significance?

And most of the posts in that thread weren't even on topic...

Christ, calm down, you'll have a fit. You asked why it hadnt been discussed already and I just showed you a post where it had. the post had of course slipped to the second page where you would miss it. I guess people got bored of it pretty quick.

carolt wrote: »

So, phil, what do you think will be the impact of today's astonishing and unexpected record jump in inflation?

In the real world? Pretty minimal.

carolt

phil_b wrote: »

the post had of course slipped to the second page where you would miss it. I guess people got bored of it pretty quick.



In the real world? Pretty minimal.

I had seen it Phil - but thanks for the link anyway.

Can't believe you think inflation making record jumps is likely to have 'minimal' impact in the face of the worst recession in donkey's years, and the huge amount of debt we have to pay off as a nation. :eek:

HAMISH_MCTAVISH

carolt wrote: »

, which is clearly the most important economic news of the day and a harbinger of major changes to come, being debated to death on here.
.

Are you actually ignorant enough to believe what you've just written there, or just being deliberately argumentative?

The most important news of the day? Why?

As Thrugelmir pointed out, this has been expected, predicted, and already discounted by the BoE. It is a temporary blip. Nothing to get remotely excited about.

Of far more importance is the news that the neutrality level for base rates is now just 2.5%. It was 5.5% for the last decade.

You can now realistically expect rates to hover between 2% and 3% for most of the next decade. Which would be a truly astonishing upwards driver of house prices.

Now THAT is important news, and "a harbinger of major changes to come".

carolt

Have you actually bothered to read the article, Hamish?

I'm being rhetorical, as the answer is clearly not.

The rise was not predicted or expected - a rise was predicted, certainly, but nothing of this magnitude.

Your second point is just utter nonsense and if you seriously believe that, you're possibly clinically insane.

Go and read the article - then comment on it.

Thrugelmir

carolt wrote: »

Have you actually bothered to read the article, Hamish?

I'm being rhetorical, as the answer is clearly not.

The rise was not predicted or expected - a rise was predicted, certainly, but nothing of this magnitude.

Your second point is just utter nonsense and if you seriously believe that, you're possibly clinically insane.

Go and read the article - then comment on it.

The BOE has the power to regulate inflation by raising interest rates. If inflation continues to prove troublesome. The downturn (as most likely we are out of recession) is far from over. The hard work to rebuild the economy is only just starting .

chucky

nothing to see here - please move along :rolleyes:

Thrugelmir wrote: »

Read the BOE Reports. :rolleyes:

Here's a little excert from November's. You may find it educational reading.

Always a good idea to get ahead of events.
Overview of the Inflation Report
November 2009

The outlook for inflation
Chart 3 shows the Committee's best collective judgement of the outlook for CPI inflation, based on the same assumptions as Chart 1. Inflation is likely to rise sharply in the near term, primarily reflecting the reversal of the VAT reduction, while sterling's past depreciation continues to push up on inflation. Thereafter, downward pressure from the persistent margin of spare capacity is the dominant force. This pressure acts to bear down on CPI inflation, although it gradually fades as the economy recovers.

http://www.bankofengland.co.uk/publications/inflationreport/infrep.htm

HAMISH_MCTAVISH wrote: »

As Thrugelmir pointed out, this has been expected, predicted, and already discounted by the BoE. It is a temporary blip. Nothing to get remotely excited about.

Mr_Mumble

Carol, you didn't think McTish was clinically insane prior to that post?!

The FT has a good summary:

The Market Eye

The unexpectedly strong rise in UK consumer prices will do nothing to halt the battle between inflation-mongers and deflationistas. Monetarists may feel a bit smug that so much liquidity sloshing around the financial system is leading to sharper price rises. But others believe that still-high consumer debt levels and excess corporate capacity will keep a lid on inflation and perhaps even deliver falling prices like those seen in Japan following the bursting of its bubble two decades ago. But the market is making its prediction. The breakeven rate – the difference between conventional 10-year gilts yields and yields on inflation-linked bonds – rose to 3.052 per cent on Tuesday, the highest since the start of October 2008.

3.052% is therefore the expected RPI inflation rate over the next decade (with slight adjustments for the liquidity premium of normal gilts and inflation risk premium of index linked).

CPI has now averaged 2.77% since Northern Rock collapsed, the market never expected deflation and the Bank of England's own pension scheme has most of its money in index-linked Gilts.

No matter how they spin it CPI was 0.3% higher than expected, the deflationistas are taking a helluva beating. :beer:

ManAtHome

chucky wrote: »

nothing to see here - please move along

Looks like we've already hit the top end of the projections (the very red stuff) with another boost to come next month when the VAT reversion kicks in. The projection if we hit 3.5% next month (not that crazy) doesn't look like the usual "2% in 2 years time" to me (mind you, BoE have been saying that since 2005 - did they really see the recession coming that far back?).