Inflation up

michaels

davomcdave wrote: »

It only helps if wages after tax are increasing faster than your mortgage interest rate. They are at the moment which is good news of course but it wasn't the case a few years back.

Wage growth is slowing just as inflation is rising. Real wages increased at a rate of 2.2% over the past year. RPI, meant to be a measure of the change in the cost of living, increased by 3.2% over the past year.

Of course slowing wage growth makes any BoE interest rate response to price inflation even less likely.

davomcdave

michaels wrote: »

Of course slowing wage growth makes any BoE interest rate response to price inflation even less likely.

I agree.

There are two reasons at the moment to increase interest rates, to defend the internal value of the pound against inflation and to defend the external value of the pound. Falling real wages make it more likely that the internal value of the pound (inflation) will stabilise somewhat in about 10 months once FX rate changes feed through. The external value of the pound has stabilised for now but it'll be interesting to see what happens as rumours of victories and defeats start to surface from the Brexit talks.

Still it sucks to find that just as your real wages started to rise, Brexit means that they started falling again. Oh well, most people won't join the dots that far so it probably doesn't matter.