UK Inflation Forecast 2011, Imminent Spike to Above CPI 4%, RPI 6%

smeagold

The VAT time bomb that has been ticking for the whole of 2010 exploded on 4th of Jan 2011 that will now likely result in an surge in Inflation to above 4% CPI and 6% RPI as I anticipated over 8 months ago during the general election campaign (05 May 2010 - Greece Economic Depression Resulting in INFLATION NOT DEFLATION Surge )
A post UK election VAT hike to 20% from 17.5% is near certain to bring in extra revenue of about £13 billion per year. This will have the effect of both spiking inflation sharply higher and maintaining the ongoing longer-term inflationary mega-trend, therefore I would not be surprised that following the implementation of a VAT tax hike that CPI spikes above 4% and RPI as high as 6%! Which would further discredit the Bank of England's mantra of "Don't Worry Folks its Only Temporary".
I wonder how many ordinary UK citizens will still continue to believe the Bank of England's statements of temporary high inflation when they see Inflation of CPI 4%+ and RPI 6% in a few short months. Will they still be willing to accept wage hikes of 2% or even freezes, or will they start to demand ever higher wage rises to match surging inflation and thus feed the the wage price spiral, especially as real UK inflation looks set to break above 8%.
Therefore the VAT increase alone continues to point to an imminent spike to above 4% CPI and above 6% RPI, very early in the 2011.



http://www.marketoracle.co.uk/Article25637.html

Sorry wrong forum

Really2

smeagold wrote: »

post UK election VAT hike to 20% from 17.5% is near certain[/B] to bring in extra revenue of about £13 billion per year. This will have the effect of both spiking inflation sharply higher and maintaining the ongoing longer-term inflationary mega-trend, therefore I would not be surprised that following the implementation of a VAT tax hike that CPI spikes above 4% and RPI as high as 6%! Which would further discredit the Bank of England's mantra of "Don't Worry Folks its Only Temporary".[/I]

Unless they raise VAT next year also how can it maintain long term inflation?

HAMISH_MCTAVISH

The current VAT rise wil not result in inflation spiking, as the inflation rate measures the rate of change.

As the previous year also saw a VAT rise, there is virtually no change.

It just means inflation won't fall.

smeagold

Really2 wrote: »

Unless they raise VAT next year also how can it maintain long term inflation?

if you read the piece he says it will fall back to 3.5 later in the year

nicko33

smeagold wrote: »

especially as real UK inflation looks set to break above 8%.

where's this real inflation index then?
they wouldn't just be just making it up would they...

smeagold

nicko33 wrote: »

where's this real inflation index then?
they wouldn't just be just making it up would they...

here:

Really2

smeagold wrote: »

if you read the piece he says it will fall back to 3.5 later in the year

So what do you think it will do in 2012 if the rate of increase stops because VAT is not going up.

I hardly think 1 year is long term?

Masomnia

nicko33 wrote: »

where's this real inflation index then?
they wouldn't just be just making it up would they...

It's the inflation rate adjusted for inflation