Britains inflation pain at highest since 1992

Graham_Devon

Britons are facing the biggest inflation squeeze in almost 20 years.
The amount of families' incomes being eaten up by higher prices reached 5.5% in the first quarter of the year.

That's the highest level since mid-1992, the eve of Black Wednesday, when interest rates were at 10%.

The analysis, which is based on Office for National Statistics data, follows news that consumer price index (CPI (Berlin: CEJ.BE - news) ) inflation - the annual measure of the changes in prices - hit 4.4% in July.

CPI was higher than expected and comfortably above the Bank of England's 2% target.

It underlines the extent to which Britons are being squeezed on two fronts: both austerity and prices.

However, what is striking is that at present inflation is causing far more direct impact to households' finances than austerity.

By comparison, the higher level of VAT only ate up 1.2% of households' incomes in the first quarter of the year.

And this is unlikely to be a temporary phenomenon. The Bank itself predicts that CPI inflation will hit 5% in the next few months - perhaps as soon as next month. The price of clothes, household goods and other sundries still have a way further to rise, according to economists.

And those 8% rail price increases are only the start: the Chancellor's deal on train tickets, allowing rail companies to increase charges by RPI plus 3%, applies for three years - not merely this year.

In other words, consumers must steel themselves for more inflation pain.

Aside from anything else, the full inflationary impact of sterling's 25% depreciation hasn't fully filtered through the system, and as it continues to do so, prices will continue to rise.

The Bank of England Governor, Sir Mervyn King, referred to this in the Inflation Report press conference last week, admitting that the Bank could, if it wanted, have met the target, but took the concerted decision not to.

http://uk.finance.yahoo.com/news/Britain-Inflation-Pain-Is-skynews-1874867382.html?x=0

So, all this nonsense of "we can't target this inflation" and "it's the wrong type of inflation and we cant do anything about it" is rebuted by Mervyn King himself, who states himself, inflation could have been nearer target if the bank had "wanted to".

The above also raises question marks over the "inflation will fall back to target when VAT returns to 17.5%" line, considering the rise in VAT only made up 1.2% of the 5.5% total.

Also notice that inflation will now return to target within 2 years, as opposed to "next year". Can't keep up!

DervProf

The "blip" is turning into a giant bump.

pqrdef

Graham_Devon wrote: »

The above also raises question marks over the "inflation will fall back to target when VAT returns to 17.5%" line

There are no plans to return VAT to 17.5%, ever.

Graham_Devon

pqrdef wrote: »

There are no plans to return VAT to 17.5%, ever.

That's true. Meant to say when the rise from 17.5% has fallen out and returns to normal.

geneer

Yay. Thanks again bulls.

purch

They took the "concerted decision not to" for very good reasons Devo.

I know this doesn't fit into the Devonian School of Economic Nonsense, which thinks that an annual GDP of minus 10% and annual CPI of 2% is great, but to most normal people, a Central Bank that is trying to stop the economy entering a depression, is a good thing.

Graham_Devon

purch wrote: »

They took the "concerted decision not to" for very good reasons Devo.

I know this doesn't fit into the Devonian School of Economic Nonsense, which thinks that an annual GDP of minus 10% and annual CPI of 2% is great, but to most normal people, a Central Bank that is trying to stop the economy entering a depression, is a good thing.

Nice swipe, but I've not mentioned, or even hinted at the premise of whether I think it's good or not.

Only stated that the whole argument that we cannot target this type of inflation was nonsense.

And why wouldn't I? I've been arguing for ages we've always taken measures to fight this type of inflation before to the tune of "no, this type of inflation you cannot control". Now we have Mervyn himself saying they could fight it, but they decided not to.

purch

Jesus.

We are standing on a precipice.

Central Banks and Governments are desperately trying to mitigate the effects of the largest deflation in asset prices since the invention of money, and you are continually whining about a loaf of bread costing 5p more than it did last year.

Sometimes I worry that people really are not aware at all, about what is actually happening out there :eek:

Graham_Devon

purch wrote: »

Jesus.

We are standing on a precipice.

Central Banks and Governments are desperately trying to mitigate the effects of the largest deflation in asset prices since the invention of money, and you are continually whining about a loaf of bread costing 5p more than it did last year.

Sometimes I worry that people really are not aware at all, about what is actually happening out there :eek:

And you don't need to tell me. Tell the "everything is ok and nothing is going to stop growth" lot.

I've never whinged that a loaf of bread costs more, or that anything costs more.

Just stating the fact that the argument over and over again that we can't do anything about the current inflation is nonsense. Continually making stuff up because I posted the quote isn't going to change that fact!

purch

I've never whinged that a loaf of bread costs more, or that anything costs more

Sorry, my bad.

Confused you with the other Graham_Devon who has started hundreds of threads on inflation, oil prices, petrol prices and every other bloody price

Graham_Devon

purch wrote: »

Sorry, my bad.

Confused you with the other Graham_Devon who has started hundreds of threads on inflation, oil prices, petrol prices and every other bloody price

And were any of them whinging about prices going up?

Or were they discussing the economy and monetry policy? I have no idea where the bitterness has come from. If I've been saying something for a while now, only to be told I'm dumb a moron etc etc because the BOE can't control this inflation, then I'll be the first to post up a comment from Mervyn stating they can, but chose not to.