Bank of England leaves monetary policy unchanged

lisyloo

An increase inflation due to a fall in the currency is also temporary

Does that assume that the increase in the cost of imported goods has been passed on to the full extent that it will be passed on?

michaels

lisyloo wrote: »

Does that assume that the increase in the cost of imported goods has been passed on to the full extent that it will be passed on?

Not yet but at some point it will be and no doubt the currency will go up and down all the time so it will be hard to know exactly when all currency effect price rises 'in the pipeline' have happened.

lisyloo

Not yet but at some point it will be and no doubt the currency will go up and down all the time so it will be hard to know exactly when all currency effect price rises 'in the pipeline' have happened.

Not quite what I meant (I think).
Currently factory gate inflation is quite high and that hasn't been passed on in full (or anywhere near) for various reasons.
What I'm asking is does your assertion (that this is a one-off effect) assume that retailers will continue to be able to absorb the hit of factory gate inflation (the alternative being that they are only able to hold it off for so long and then have to put up prices).
i.e. say a firm has 10% factory gate inflation and has so far only managed 2% increase in their good, but later find they need to increase further due to the original 10%.


I don't think that the circa 20% that's come of sterling since brexit can be put in the same category as normal currency fluctuations.

michaels

I suspect the total price increase were the currency to stay down would be between 5% and 10% but at the same time there are also price increases (in USD terms) for food and commodities so a bit more inflation (that they are seeing in the EU. However even if this takes 2 years to fully feed through it is still a one -off unless wages, service industry prices etc all start rising to try to keep up. And thus it will only require a policy response if that happens otherwise it is exactly like 2011, prices up, everyone worse off but no need to raise interest rates to reduce demand in the economy.