Inflation rises to 3.5% (or falls to 3.6% for the rose tintacle brigade!)

ILW

Maybe have a chat with the Bundesbank.

Generali

Graham_Devon wrote: »

I'm not expecting them to increase base rates if that's what you are asking? It's too late. They could have done more a few years ago, but that's hindsight.

What should they have done and when do you think?

Graham_Devon

Generali wrote: »

What should they have done and when do you think?

Not released the extra QE they recently released based on the fact we were heading for deflation.

Is this a quiz?

Let's turn this around. Do you feel the BOE have worked at optimum performance and got he best results?

Generali

Graham_Devon wrote: »

Not released the extra QE they recently released based on the fact we were heading for deflation.

Is this a quiz?

Let's turn this around. Do you feel the BOE have worked at optimum performance and got he best results?

I think they're doing very well in what are extremely difficult circumstances.

The biggest problem they have are that the current set of circumstances facing the UK economy are somewhere between extremely unusual and unique. As a result they have very little to guide them.

The fact is that money supply is now falling in pretty much every month that QE isn't released. If the money supply falls in a heavily indebted economy then more money is used to service the debt causing further falls in the money supply as money creation through the fractional reserve banking system goes into reverse. The BoE has little choice but use QE given the current set of policies being pursued by the Government.

Don't forget that price stability is not the only aim of the MPC, they are also meant to support Government policy.

michaels

Have a look at Steph Flanders blog today Graham:

Try and acheive competitiveness via internal devaluation and debt as a proportion of GDP will become unmanageable so the only way to regain competitveness avoiding default must be via (unanticipated?) price inflation.

So the only arguement is whether the bank should have been honest about what it is doing? The rational expectations arguement suggests that making the policy explicit would have reduced its effectiveness.

wotsthat

CPI inflation rose to 3.5% in March from 3.4% in February, according to the Office for National Statistics (ONS).

Retail Prices Index (RPI) inflation fell slightly to 3.6% from 3.7%.

It's a single months data showing no change and comes of the back of 5 months of falling inflation.

The trend remains downward. Surely the one thing we've learnt in the last few years is that things don't move in straight lines.

It gets a bit more Mumsnet every day around here.

DervProf

Graham_Devon wrote: »

Thankfully, economists have now suggested this increase is just a blip.Another blip, but just a blip.

And let's not forget that Mervyn King is doing a blipping good job at controlling and predicting inflation.

ILW

michaels wrote: »

Have a look at Steph Flanders blog today Graham:

Try and acheive competitiveness via internal devaluation and debt as a proportion of GDP will become unmanageable so the only way to regain competitveness avoiding default must be via (unanticipated?) price inflation.

So the only arguement is whether the bank should have been honest about what it is doing? The rational expectations arguement suggests that making the policy explicit would have reduced its effectiveness.

So deceipt rather than incompetence is the order of the day then. Nice.

StevieJ

Generali wrote: »

The other difference is that the RPI is calculated using an arithmetic mean whereas CPI is calculated using a geometric mean. That is the main reason that CPI is almost always less than RPI. The exception would most likely be if interest rates were rising fast.

Doesn't CPI also include substitution which would obviously have dampening effect.

heathcote123

Generali wrote: »

What do you expect the BoE to do though?

Lots of people (not just here) seem to be of the opinion that you dial up a base rate and get an inflation rate back. It simply doesn't work like that.

Where do you think inflation would be if base rates were 5%? - given the effect this would have on our currency.