Economy set for "Tripple Whammy"

Graham_Devon

The British economy faces a triple whammy of higher inflation, lower growth and rising unemployment, according to one of the Bank of England's most senior policy makers. Living standards over the next few years will rise only "minimally".

More here: http://www.independent.co.uk/news/business/news/economy-set-for-triple-whammy-admits-bank-chief-2032213.html

Main parts I have picked out as I think they hold the most value. Loads of parts for everyone to pick out as they wish though!

Mr Dale said: "The near-term outlook for both growth and inflation has deteriorated over the past couple of months. Inflation has come out a little higher than expected, and the news on VAT in the June Budget means that the time it will take inflation to get back to target will be pushed out, and I expect it will be above target until the end of next year.

The economy, said Mr Dale, would not return to normal "for an awfully long time".

Tax hikes, muted pay rises, unemployment and public spending cuts will mean that things "won't feel good" for many families. Rising unemployment will also restrain house prices.

Mr Dale condemns what he calls "dangerous talk" and complacency over rising prices: "I read a newspaper article the other day suggesting that a little more inflation might be a good idea because it would dissolve away mortgage debt. And a very senior executive said to me, 'aren't we going back to the bad old days when we just devalued and inflated our way out of trouble?'

Mr Dale is sometimes taken to rest on the "hawkish" end of the Bank's Monetary Policy Committee, broadly taking a more pessimistic view about inflation than some of his colleagues, and his latest remarks will add to the pressure, albeit nascent for now, on the Bank to nudge rates up more quickly.

In another news article, a group of economists were now giving a 50% chance QE would start again this year.

Really2

I wont quote this to you as we know that can cause problems but I must say.

Mr Dale is a genius.

The news on VAT in the June Budget means that the time it will take inflation to get back to target will be pushed out, and I expect it will be above target until the end of next year.

Well considering VAT will add 1% straight across the whole of 2011 that has got to be the most iron on prediction ever.
Inflation should fall again in 2012 as the previous years VAT increase means comparing YOY the increases in prices will be smaller.


If all of the above happens rates will not be going anywhere? I really do not see why they ended on that after writting such a review. It is obvious the longer the economy is suffering the less likely rates are going to go up not more.

HAMISH_MCTAVISH

Living standards over the next few years will rise only "minimally".

The biggest crisis since the great depression, and living standards will still increase.

Excellent news.:beer:

purch

What's a "Whammy" ?? :eek:

Generali

purch wrote: »

What's a "Whammy" ?? :eek:

It's a sort of cheap insulated bucket used in the Southern USA to carry large amounts of take away food or ice cream.

They come in single, double and triple. Triple is the largest and can be quite unwealdy.

Really2

purch wrote: »

What's a "Whammy" ?? :eek:

If you play guitar it is another word for a tremolo.

Or it could be 3 wham bars, mmmmm used to love them (even though they could pull your teeth out.:))

ess0two

purch wrote: »

What's a "Whammy" ?? :eek:

Chocolate covered peanut bar?

lemonjelly

purch wrote: »

What's a "Whammy" ?? :eek:

Isn't it an ice cream cone, with 2 flakes, some sort of squirty sauce & sprinkles on it?

michaels

Never heard of stagflation? Often the result of an adverse terms of trade adjustment such as a commodity price shock or devaluation.

Really2 wrote: »

It is obvious the longer the economy is suffering the less likely rates are going to go up not more.

1984ReturnsForReal_2

Makes you think that canceling billions of pounds worth of capital projects across the UK the moment they walked in the door was possibly a very big mistake....:T:eek:

Really2

michaels wrote: »

Never heard of stagflation? Often the result of an adverse terms of trade adjustment such as a commodity price shock or devaluation.

Why would you increase rates with stagflation, you may lower incoming inflation a bit on currency adjustment, But all you do then is increase your lending costs to businesses etc (so basically tip yourself in to recession which then trashes you money anyway).

If you get a commodity shock EG oil 2007 regardless what you do, you are going to get inflation. So raising rates while the economy was stagnant would have been to the detriment of the economy,
2007 is perhaps a great example and the rate increases did nothing to curb the inflation it just tipped the economy over the edge.