UK Inflation Rate

worldtraveller

Inflation, as measured by the Office for National Statistics' Consumer Prices Index (CPI), was 3.0% in December 2017, down from 3.1% in November 2017.

Main points

• The Consumer Prices Index including owner occupiers’ housing costs (CPIH) 12-month inflation rate was 2.7% in December 2017, down from 2.8% in November 2017.
• Following a steady increase from late 2015, since April 2017 the CPIH rate has levelled off, ranging between 2.6% and 2.8%.
• The downward effect came mainly from air fares, along with a fall in the prices of a range of recreational goods, particularly games and toys.
• The downward contributions were partially offset by an increase in tobacco prices, reflecting duty increases that came into effect following the Autumn Budget, along with an increase in petrol and diesel prices.
• The Consumer Prices Index (CPI) 12-month rate was 3.0% in December 2017, down from 3.1% in November 2017.

ONS

michaels

Be interesting to see where this goes now, in theory the GBP devaluation should be dropping out (especially as vs the USD we are now not that far from where we were before the vote), however (perhaps as a consequence of the USD weakness) commodity and especially oil prices are creeping up and these obviously have a strong direct influence on the price index.

What is the consensus forecast path?

worldtraveller

Inflation, as measured by the Office for National Statistics' Consumer Prices Index (CPI), was 3.0% in January 2018, unchanged from December 2017.

Main points

• The Consumer Prices Index including owner occupiers housing costs (CPIH) 12-month inflation rate was 2.7% in January 2018, unchanged from December 2017.
• The largest downward contribution to change in the rate came from prices for motor fuels, which rose by less than they did a year ago.
• The main upward effect came from prices for a range of recreational and cultural goods and services, in particular, admissions to attractions such as zoos and gardens, for which prices fell by less than they did a year ago.
• The Consumer Prices Index (CPI) 12-month rate was 3.0% in January 2018, unchanged from December 2017.

ONS

tara747

It's about time interest rates went up a bit more...

Lornapink

tara747 wrote: »

It's about time interest rates went up a bit more...

Everyone claims FTB's need all the help they can, battling 'the disadvantages' the boomer generation has over them.


Now you're saying you want FTB's to face higher mortgage payments, so boomers get higher savings returns.

GreatApe

Why so we have a 12 month inflationary figure. Would it not be better to have a running 3 or even 5 year figure to average out a bit more. In the last decade we have had from below 0% inflation to above 5% inflation. Clearly the figures vary too much for any one individual year to be meaningful

The inflation rate for the last 10 years is 2.8% averaged. The inflation rate over the last 3 years is just 2.1% so what is this talk of big inflation. Inflation has been low and will likely to continue to be low
Any one year above 3% should be ignored and a running 3/5 year figure would be better

tara747

Lornapink wrote: »

Everyone claims FTB's need all the help they can, battling 'the disadvantages' the boomer generation has over them.


Now you're saying you want FTB's to face higher mortgage payments, so boomers get higher savings returns.

Sigh. Not this again.

Higher interest rates usually cool the housing market.

Higher interest rates also make it easier to save for a deposit.

Hgher deposit + lower house prices = FTB deposit is a higher % of a house price = any overpayments will reduce the capital much more quickly

FTBs who are saving for a deposit would LOVE higher interest rates, believe me.

I'd rather pay £100k at 10% interest rates than £200k at 5%. It's not rocket science

westernpromise

tara747 wrote: »

Sigh. Not this again.

Higher interest rates usually cool the housing market.

Higher interest rates also make it easier to save for a deposit.

Hgher deposit + lower house prices = FTB deposit is a higher % of a house price = any overpayments will reduce the capital much more quickly

FTBs who are saving for a deposit would LOVE higher interest rates, believe me.

I'd rather pay £100k at 10% interest rates than £200k at 5%. It's not rocket science

If interest rates were 10% you'd be able to borrow less than if they were 5% and if house prices had been falling you'd need a much bigger deposit.

It was much easier to buy in 1988, before the crash, than in 1990, in the middle of it, and even as late as 1995, when prices were still falling or flatlining.

tara747

westernpromise wrote: »

If interest rates were 10% you'd be able to borrow less than if they were 5% and if house prices had been falling you'd need a much bigger deposit.

It was much easier to buy in 1988, before the crash, than in 1990, in the middle of it, and even as late as 1995, when prices were still falling or flatlining.

If interest rates were 10%, houses would be cheaper, so I would NEED to borrow less.

Why do you assume that people want to borrow as much as possible? I want to borrow as little as possible.

It may SEEM easier to buy before a crash, that's because banks are throwing money at people.

Take two people as an example.

One bought in 1988, near the top of the market with only a 10% deposit. They got a loan easily, but the repayments crippled them and they were in negative equity for years The eventually paid off their mortgage 25 years later, in 2013.

The other saved for an extra 7 years and bought in 1995, near the bottom of the market. The banks weren't lending so freely, but houses were a lot cheaper. They had managed to save a 50% deposit, which got them a lower interest rate, and they paid off their mortgage in 10 years. They were mortgage-free by 2005 :beer:

GreatApe

The economy will react to interest rates. If interest rates move to 10% and stay there the economy will move towards 12% inflation.

What choice does the economy/business/government have if the BOE foolishly moved interest rates to 10%?

Either we enter a depression and all stop spending to save up pieces of paper for the 10% interest on them. Or business and government adjust to increase prices by about 12% a year so that the machinery of civilisation doesn't grind to a halt. Simply put real rates can't be very high typically they will be -2 to +2%

So higher rates will lead to higher inflation. In a high inflation environment houses won't crash in nominal price because people would be getting annual 10-15% pay increases and use their higher wages to bid higher prices.

This is obvious if you look at higher base rate countries.
Eg Turkey has 9% base rate so does that mean house prices were falling?
No they have doubled in five years because inflation is about 12% in the country.


House prices are almost fully determined by the local economy
Strong local economy strong house prices
Weak local economy weak house prices