CPI Forecasts

pacemaker1000

antrobus wrote: »

I think the OP is more concerned about pension planning, than socio-economics.:)

Yes thanks, that’s my concern.
The average for the last 11 years has been 2.6% but since Brexit it’s creeped up and despite the BOE target of 2% it’s now over 3% which will mean a letter to the Treasury this week.
Current forecasts show a return to 2% in the next two years but with all that’s going on politically can that be counted on or could we see a return to over 5%?

bigadaj

pacemaker1000 wrote: »

Yes thanks, that’s my concern.
The average for the last 11 years has been 2.6% but since Brexit it’s creeped up and despite the BOE target of 2% it’s now over 3% which will mean a letter to the Treasury this week.
Current forecasts show a return to 2% in the next two years but with all that’s going on politically can that be counted on or could we see a return to over 5%?

As abive nobody knows, but one of the main drivers behind the inflation factors has been the fall in the pound. There's no fundamental reason why the pound can't fall further, it's more likely that it will level off and possibly strengthen.

The fall in the pound has pushed prices up for imported goods, domestic inflationary pressures are low, with low wage inflation, so the probability is that inflation won't take off hugely but no guarantees.

BobQ

stoozie1 wrote: »

In response to BobQ above; why would food price inflation running at 4% make people feel poorer? I feel it's the one we have most control over and the household can adjust to compensate. With a fixed price utility like a phone package, or one's mortgage, we don't have the same control.

I agree but people do not scrutinise those costs every week and they do not change that often, but they note their supermarket shop on a weekly basis.

Another point is that not everyone spends on all the things in the index, but some they do.

BobQ

pacemaker1000 wrote: »

Yes thanks, that’s my concern.
The average for the last 11 years has been 2.6% but since Brexit it’s creeped up and despite the BOE target of 2% it’s now over 3% which will mean a letter to the Treasury this week.
Current forecasts show a return to 2% in the next two years but with all that’s going on politically can that be counted on or could we see a return to over 5%?

Sorry I forgot you posted this on the pensions thread. My impression is that those in the BOE and OBR generating the forecast have to envisage it will return to 2% in a couple of years or they are effectively admitting they are not managing interest rates (or that there is political interference in them doing that).

ETA from the OBR guidance: "Beyond the short term, our CPI inflation forecast is more judgement driven. Typically, by around the third year of the forecast we will assume that inflation returns to the Bank of England’s 2 per cent target. On the assumption that future shocks are as likely to push inflation up or down, our central forecast is typically that inflation remains at target thereafter. "

I think the index will go higher but the decline may not be as swift as they suggest. The country still has a lot of personal debt and rises in interest rates will affect CPI.

It is not an exact science. The rate is easily manipulated. For intstance the BOE needs to write to the Chancellor if it is over 3% but against a rising trend we have two consecutive months of exactly that.

Thrugelmir

PeacefulWaters wrote: »

Mandates can be unset by politicians with staggeringly different agendas.

Then one has to consider the wider implications. Words are easy. Actions are a little more difficult.