UK inflation to plummet to fresh low

Loughton_Monkey

Generali wrote: »

Good for them.

RPI is a cost of living index.

So it's costing me 1% extra to 'live'? This doesn't bode well for those individuals with precisely 0% increase in income. Presumably they need to stop living.

Generali wrote: »

....The most likely thing is that inflation will normalise again at 2-3% in a year or two. The risk is that Central Banks will poo themselves and 'combat deflation' leading to inflation in 2-3 years.

If that's what we want, an immediate VAT rise to 22.5% would be a wonderfull boost. And it would help with the deficit. Let's go!

Cyberman60

Loughton_Monkey wrote: »

As someone who suffered inflation of 17%, 26%, 13%, 18% for the first 4 years of my working life, I rather welcome low prices.

I hope it lasts, so that my 4% 'granny bond' will buy a lot more goodies.

So true. This is excellent news for people on fixed incomes such as pensioners who will get a guaranteed 2.5% rise (myself 3% !!) and those on benefits.

Then of course the cost to the exchequer for public sector pay awards will be low, having a positive knock-on effect of reducing Labour's annual deficit legacy which now stands at around 90 Billion. :T

michaels

Cyberman60 wrote: »

Then of course the cost to the exchequer for public sector pay awards will be low, having a positive knock-on effect of reducing Labour's annual deficit legacy which now stands at around 90 Billion. :T

Yes but simple maths shows that increases in nominal gdp are much more effective in bringing down the debt to gdp ratio than small reductions in the deficit. And of course debt to GDP is much more relevant to ongoing affordability of debt.

HAMISH_MCTAVISH

I'm guessing 'the usual suspects' won't be along any time soon with hysterical wailing about the BOE being useless at keeping inflation on target, and that we should immediately slash rates into negative territory and implement further QE.

purch

Generali wrote: »

The risk is that Central Banks will poo themselves and 'combat deflation' leading to inflation in 2-3 years.

And we know they will do something stupid in the end. They will play it cool for a while, but in the end they won't be able to help themselves meddling.

Just leave well alone, it'll work itself out over the course of the year and then there will be much more chance of a return to "normality" soon.

antrobus

Nick_C wrote: »

I think most people, including HMG, would disagree with you.

Then you'd be wrong.

Nick_C wrote: »

As is CPI, which you described as a measure of inflation!

CPI is a measure of consumer inflation.

Nick_C wrote: »

...What's the rate of inflation using the GDP deflator then?

It was 1.79% for the 2013-14 financial year.

Loughton_Monkey

The status of RPI may be confusing. I thought it would help by explaining it very simply......

Although RPI has been assessed against the code of practise for official statistics, it remains an official statistic as recognised by the officials, but no longer meets the official standard for National statistics. So whilst officially designated as an official statistic, it has been de-designated, officially, as a National statistic, by the designated officials. So whilst it can officially be designated as an official statistic, it may only be unofficially used by officials as a published Statistic, provided the officials officially present the statistic as having been assessed against the official code of practice for official statistics and found not to meet the official standard required for designation as a National Statistic.

System

How can inflation that is already in very low single figures "plummet" to anything?
It's like "diving" into 3" of water.

Cyberman60

Loughton_Monkey wrote: »

The status of RPI may be confusing. I thought it would help by explaining it very simply......

Although RPI has been assessed against the code of practise for official statistics, it remains an official statistic as recognised by the officials, but no longer meets the official standard for National statistics. So whilst officially designated as an official statistic, it has been de-designated, officially, as a National statistic, by the designated officials. So whilst it can officially be designated as an official statistic, it may only be unofficially used by officials as a published Statistic, provided the officials officially present the statistic as having been assessed against the official code of practice for official statistics and found not to meet the official standard required for designation as a National Statistic.

Pension increases used to be based on RPI until about 3 years ago, but in order to save cash (thanks to Labour's annual deficit) the government designated the usually lower CPI on which pension increases should be based in the future. Thankfully, my pension was guaranteed to be based on the higher RPI.

The side-effects of Labour's overspending are far-reaching and will be for there for decades. Still the ignorant idiots amongst us will continue to vote for them to borrow even more. :rotfl:

CLAPTON

michaels wrote: »

Yes but simple maths shows that increases in nominal gdp are much more effective in bringing down the debt to gdp ratio than small reductions in the deficit. And of course debt to GDP is much more relevant to ongoing affordability of debt.

adding the caveat that interest rates paid on the debts don't rise significantly