UK inflation rate falls to 1.7%

antrobus

AndyGuil wrote: »

It has already gone from being predicted for the end of this year to early 2015. Now we still have deflationary pressures from europe, US gas and increased oil supply coming soon. These are going to hold back the base rate.

That's a completely different argument though, isn't it?

AndyGuil

antrobus wrote: »

That's a completely different argument though, isn't it?

With low inflation hanging over the economy the base rate will stay low.

Thrugelmir

AndyGuil wrote: »

With low inflation hanging over the economy the base rate will stay low.

The BOE has a far wider remit than just low inflation.

Low base rate isn't helping solve the structural reforms that are required to the finance system. Though the BOE has a range of tools in the box that could have an impact without changing base rate in the short term.

AndyGuil

Thrugelmir wrote: »

The BOE has a far wider remit than just low inflation.

Low base rate isn't helping solve the structural reforms that are required to the finance system. Though the BOE has a range of tools in the box that could have an impact without changing base rate in the short term.

Absolutely. The current below 2% inflation makes it unlikely for the rates to rise for a while yet. http://www.thisismoney.co.uk/money/news/article-1607881/When-UK-rates-rise.html

antrobus

AndyGuil wrote: »

With low inflation hanging over the economy the base rate will stay low.

With CPI at 1.7%, a base rate of 2.0% would be 'low'.

Thrugelmir

AndyGuil wrote: »

Absolutely. The current below 2% inflation makes it unlikely for the rates to rise for a while yet. http://www.thisismoney.co.uk/money/news/article-1607881/When-UK-rates-rise.html

There's an ingrained desire for inflation. Whereas deflation is not actually the bubonic plague it is portrayed to be. The negative is the pillars of debt on which the UK economy is built. Increase in spending is no longer the answer to the problem. As spend alone does not increase productivity. We should welcome very low inflation.

AndyGuil

antrobus wrote: »

With CPI at 1.7%, a base rate of 2.0% would be 'low'.

That is low, but still not going to happen with inflation currently below target.

AndyGuil

Thrugelmir wrote: »

There's an ingrained desire for inflation. Whereas deflation is not actually the bubonic plague it is portrayed to be. The negative is the pillars of debt on which the UK economy is built. Increase in spending is no longer the answer to the problem. As spend alone does not increase productivity. We should welcome very low inflation.

I think inflation on target is the most desired for the BOE as well as a stable economy. Economic stability prevented rises previously. Now below target inflation is holding it back. Economically deflation is unwanted because money movements are lower and salaries reduce nominally. Inflation reduces debt in real terms as you probably know.

Generali

BillJones wrote: »

The one product that always felt strange to me was mortality bonds or swaps, where the coupon could apparently depend on an actual named cohort of people. This means that if a dentist from Basingstoke was hit by a bus a bod's payout in London would decrease a little bit.

Our swap is really about shifting cash flows forward: we get the insurance premia and pay out on the death of the insured. We got a good deal because at the time (2008) the Bancassurance company needed cash.

In theory our cash flows change as the result of a single death but I don't think we could start bumping off individuals or getting them to stop smoking in order to profit.

Thrugelmir

AndyGuil wrote: »

I think inflation on target is the most desired for the BOE as well as a stable economy. Economic stability prevented rises previously. Now below target inflation is holding it back. Economically deflation is unwanted because money movements are lower and salaries reduce nominally. Inflation reduces debt in real terms as you probably know.

That's an economic theory that may have come undone.

It's why borrowers are rewarded at the expense of those that save.

The USA suffered deflation for a 150 years before 1913. Did it no harm in terms of becoming an economic powerhouse for a century.