Is inflation becoming sticky?

RogerPensionGuy

Inflation coming down!

I just purchased my last coffee in Pret today and it was £3.20 and was sure it just went up to £3 a little while ago.

I asked at the till and was advised, yes indeed, prices went up in April and now again.

IIRC, Macdonalds large Americano was £1.29 a few months ago and has gone up twice or 3 times and now £1.69 

Looks like core inflation has become very very sticky. 

Pat38493

Still - this old thread from April makes NedS look like a better expert than the BOE!

dealyboy

@Pat38493 said:

Still - this old thread from April makes NedS look like a better expert than the BOE!

Who's that? ... 'in for lunch' Ned (@NedS)

RogerPensionGuy

Pat38493 said:

Still - this old thread from April makes NedS look like a better expert than the BOE!

Yes indeed, IMHO I thought the Bank of England just kept hoping talking about a nice soft landing and their slow gentle approach would just catch the tide in time.

I think QE and 12odd years of easy cheap money has allowed the UK to be unprepared for the expected ramp up of interest rates and just too much money is in the system to contain and control core inflation. 

The government and banks have done so much stuff helping house price runaway with little regards to wages, tax or higher interest rates in the future, this show took many years of sleeping at the wheel unfortunately. 

Nebulous2

Nobody seems to have a handle on how much of the enforced covid savings people still have available. I read somewhere recently that there could still be 10% of GDP available to people. 

I've been gathering my own anecdotal evidence about pubs, restaurants and leisure activities bursting at the seams, despite greatly increased costs. 

We aren't going to see much improvement while demand continues to outstrip supply. 

On a positive note for me, if high rates persist until September I'll be in line for another chunky increase in my DB pension. 

It would appear there are too many people like me around however, and unlike me, many of them don't seem to be making any cutbacks. 

Albermarle

I've been gathering my own anecdotal evidence about pubs, restaurants and leisure activities bursting at the seams, despite greatly increased costs.

Also despite holidays in Greece, Spain etc being apparently 20/25% more expensive, there are so many holiday flights that air traffic control is struggling to cope.

Something has to crack somewhere at some point .

Nebulous2

Albermarle said:

I've been gathering my own anecdotal evidence about pubs, restaurants and leisure activities bursting at the seams, despite greatly increased costs.

Also despite holidays in Greece, Spain etc being apparently 20/25% more expensive, there are so many holiday flights that air traffic control is struggling to cope.

Something has to crack somewhere at some point .

Yes - exactly. I've posted in the holiday forum about this. I've been to Tenerife twice in the last 18 months, and wanted to go back again in October / November. I've refused to pay what they are asking to go to the hotel I wanted and wont be going. 

There is increasing evidence that companies are using inflation to build profits, as many members of the public suspected, but it will continue as long as people are willing to pay it. 

Pat38493

Nebulous2 said:

Albermarle said:

I've been gathering my own anecdotal evidence about pubs, restaurants and leisure activities bursting at the seams, despite greatly increased costs.

Also despite holidays in Greece, Spain etc being apparently 20/25% more expensive, there are so many holiday flights that air traffic control is struggling to cope.

Something has to crack somewhere at some point .

Yes - exactly. I've posted in the holiday forum about this. I've been to Tenerife twice in the last 18 months, and wanted to go back again in October / November. I've refused to pay what they are asking to go to the hotel I wanted and wont be going. 

There is increasing evidence that companies are using inflation to build profits, as many members of the public suspected, but it will continue as long as people are willing to pay it. 

Some of it may be a combination both ways - some people still have money in the bank from Covid, whilst companies see themselves as having lost a lot of money in Covid and they want it back.  At some point the bubble will burst I guess, then the public runs out of patience or money.

RogerPensionGuy

Greedflation and wageflation is hard to control, maybe we should expect Bank of England base rate of 5 to 6% for a couple of years.

The link below is a fair read.

https://www.axios.com/2023/05/18/once-a-fringe-theory-greedflation-gets-its-due

Pat38493

RogerPensionGuy said:

Greedflation and wageflation is hard to control, maybe we should expect Bank of England base rate of 5 to 6% for a couple of years.

The link below is a fair read.

https://www.axios.com/2023/05/18/once-a-fringe-theory-greedflation-gets-its-due

This is my current assumption although it's of course impossible to be sure.  Because most people are on fixed rate mortgage etc, the impact of increasing interest rates on the actual economy, as opposed to the hysteria level of news stories, probably takes a long time to feed through.  Unfortunately that means there is a big risk of taking it too far, which you won't even see until afterwards.....