MSE News: Inflation down to 3% ahead of Budget

Generali

Anyone know why there's a disconnect between RPI and CPI? I believe that the main difference between the two is the treatment of housing costs, especially mortgages.

Mortgage costs seem to be stable or perhaps even falling slightly. At the risk of setting Hamish_McTavish off, is the difference rents or just different weightings?

goRt

jim83 wrote: »

For what it's worth, inflation indices actually fell last month and rose this month. From the headline figure you get the opposite impression.

I've charted the MOM data:
RPI; RPIX; CPI

No sign of CPI dropping down to 2% any time soon.

Those are the raw indices, not the rate of change which everyone refers to

Really2

Generali wrote: »

Anyone know why there's a disconnect between RPI and CPI? I believe that the main difference between the two is the treatment of housing costs, especially mortgages.

Mortgage costs seem to be stable or perhaps even falling slightly. At the risk of setting Hamish_McTavish off, is the difference rents or just different weightings?

In the year to February, RPI annual inflation was 3.7 per cent, unchanged from January. The main factors affecting the CPI also affected the RPI. Additionally there was significant upward pressure to the change in the RPI annual rate from housing. This was driven mainly by mortgage interest payments which fell by 0.2 per cent this year but by 7.3 per cent a year ago following January 2009’s half point decrease in the Bank rate. Within housing, there was also a large upward effect from house depreciation, which rose this year but fell a year ago.

http://www.statistics.gov.uk/cci/nugget.asp?ID=19

Just for you.

Generali

goRt wrote: »

Those are the raw indices, not the rate of change which everyone refers to

The rate of change is just the slope on the graph though and it's a great way to see how that's changing.

Generali

Really2 wrote: »

http://www.statistics.gov.uk/cci/nugget.asp?ID=19

Just for you.

Danke me old Dutch.

StevieJ

Really2 wrote: »

http://www.statistics.gov.uk/cci/nugget.asp?ID=19

Just for you.

So house price appreciation means higher wages for many (who are tied to RPI), was somebody asking the question, who gains from HPI

Generali

StevieJ wrote: »

So house price appreciation means higher wages for many (who are tied to RPI), was somebody asking the question, who gains from HPI

Especially those that already own a house because they don't get hit by the cost but they get the pay rise!

StevieJ

Generali wrote: »

Especially those that already own a house because they don't get hit by the cost but they get the pay rise!

Those pesky pensioners again :mad: Although I suppose it was the opposite this time last year.
Tramp and Slaphead will be having kittens thinking about those inflation proof public sector pensions

DaddyBear

SO RPI at 3.7%
Interest rates at 0.5%

Can anyone spot the deliberate mistake?

jim83

Really2 wrote: »

But how much of that is down to VAT? It would be fairly odd to annualise it knowing their had been a 2.5% VAT increase at the start of the year.

Fortunately, CPI is also published with the effect of changes in indirect taxation stripped out.

CPIY

I think this is a very interesting graph. With the effect of tax increases removed, real prices plummeted last month as retailers did not immediately pass on the VAT rise to customers. This should correct at some point, and with that correction there will be a large jump up in the headline rate.

It's also worth noting that there was very little effect on core prices when all other indices fell during the period after 2008 Q3.

The BOE are, in my opinion, greatly understating the risk of inflation.