UK Inflation Rate

dktreesea

Britain is, and has been for some time, moving more and more towards a low wage, high cost economy. Manufacturers and importers may not be able to pass the costs onto consumers because they are already voting with their wallets and deciding to go without instead.


Parity with the Euro may not be coming for some time, because we buy far more from the EU than they buy from us, so once we leave, in the absence of a free trade agreement with no strings attached (probably the only type of agreement acceptable to Brits), I would think that would leave a far greater hole in their economy than in ours.


Parity with the USD on the other hand, could happen. The US have a health service that, for the most part, is not funded by the US taxpayer, minimal social welfare, and an attitude towards retirees that says retirement should be self funded. They're bringing manufacturing back to The States, dumping imports from countries where they have had a huge trade imbalance (very easy to import from China but quite difficult to export to them) and there's currently a huge campaign to Buy American. All of that will do wonders for their unemployment levels and their economy.

worldtraveller

British consumer prices rose last month at the fastest pace since June 2014, caused by higher global oil prices and the Brexit vote-fuelled fall in the value of sterling, official data showed on Tuesday.

Consumer prices rose 1.8 percent compared with a year earlier, the Office for National Statistics said, slightly below expectations for a 1.9 percent annual rise in a Reuters poll of economists.

Reuters

Main points

• The Consumer Prices Index (CPI) rose by 1.8% in the year to January 2017, compared with a 1.6% rise in the year to December 2016.
• The rate in January 2017 was the highest since June 2014.
• The main contributors to the increase in the rate were rising prices for motor fuels and to a lesser extent food prices, which were unchanged between December 2016 and January 2017, having fallen a year ago.
• These upward pressures were partially offset by prices for clothing and footwear, which fell by more than they did a year ago.
• CPIH (not a National Statistic) rose by 2.0% in the year to January 2017, compared with a 1.7% rise in the year to December 2016.

ONS

davomcdave

worldtraveller wrote: »

British consumer prices rose last month at the fastest pace since June 2014, caused by higher global oil prices and the Brexit vote-fuelled fall in the value of sterling, official data showed on Tuesday.

Consumer prices rose 1.8 percent compared with a year earlier, the Office for National Statistics said, slightly below expectations for a 1.9 percent annual rise in a Reuters poll of economists.

Reuters

Main points

• The Consumer Prices Index (CPI) rose by 1.8% in the year to January 2017, compared with a 1.6% rise in the year to December 2016.
• The rate in January 2017 was the highest since June 2014.
• The main contributors to the increase in the rate were rising prices for motor fuels and to a lesser extent food prices, which were unchanged between December 2016 and January 2017, having fallen a year ago.
• These upward pressures were partially offset by prices for clothing and footwear, which fell by more than they did a year ago.
• CPIH (not a National Statistic) rose by 2.0% in the year to January 2017, compared with a 1.7% rise in the year to December 2016.

ONS

It seems likely that CPI will be above target next month and inflation has been rising and continues to rise quickly. It'll be interesting to see how long the MPC can sit on their hands.

worldtraveller

CPIH is at 2.0%, up from 1.7% in December. The difference between the CPI and CPIH annual rates in January was 0.2 percentage points, up from 0.1 percentage points in December.

michaels

davomcdave wrote: »

It seems likely that CPI will be above target next month and inflation has been rising and continues to rise quickly. It'll be interesting to see how long the MPC can sit on their hands.

1) Target is within 1% of 2% so anywhere between 1% and 3% is within target and greater than 3% is above target.
2) BoE 'sat on their hands' when inflation went over 5% in 2012/13
3) Inflation in the Eurozone (no currency fall) was 1.8% last month and may well be higher when they get round to publishing their January figure and yet they still have 'super QE' (buying corporate bonds) and negative interest rates

But keep dreaming about a UK rate rise if you wish.

westernpromise

davomcdave wrote: »

It seems likely that CPI will be above target next month and inflation has been rising and continues to rise quickly. It'll be interesting to see how long the MPC can sit on their hands.

The MPC's inflation target is 2% and they have to write a letter of explanation to the government every time it misses by more than 1%.

So in effect they are targeting inflation to be in the 1 to 3% range. It's just above the middle of that range, so I'm not sure what you mean by "how long the MPC can sit on their hands".

Perhaps you're desperate for a rate rise to impoverish people you envy?

Dream on!

edit: michaels - snap!

davomcdave

michaels wrote: »

1) Target is within 1% of 2% so anywhere between 1% and 3% is within target and greater than 3% is above target.
2) BoE 'sat on their hands' when inflation went over 5% in 2012/13
3) Inflation in the Eurozone (no currency fall) was 1.8% last month and may well be higher when they get round to publishing their January figure and yet they still have 'super QE' (buying corporate bonds) and negative interest rates

But keep dreaming about a UK rate rise if you wish.

No, the inflation target is 2%. The BoE has to write to the Chancellor if inflation is more than 1% above or below that, below 1% or above 3%.

Inflation is starting to rear its head across much of the world and rates are likely to rise as a result. I don't really care what happens to rates in the UK one way or another as I have no vested interest but I think they will rise. The fall in the pound is pushing up inflation in the UK. That wages don't seem to be reacting to the rise in inflation will reduce the chances of the MPC pushing up rates but reduces living standards.

BobQ

The remaining question is where will CPI go? 3% by end of 2017?

davomcdave

BobQ wrote: »

The remaining question is where will CPI go? 3% by end of 2017?

My guess is closer to 4 or 5% unless the pound comes back a bit. There are a lot of variables in there though especially the price of oil though.

Masomnia

So what's going to change prices so significantly between December 2016 and December 2017?

Inflation will obviously rise because of the fall in the £, but it will be more spread out, so I think the way the figures are arrived at will flatter it a bit. I would guess at 2 - 3% through the rest of 2017.