Inflation higher than expected yet again

boingy

shortseller09 said:

Can someone explain how Sunak can possibly take credit for halving inflation?

Falling energy and food prices have absolutely nothing to do with the government, what am I missing?

You are missing the difference between facts and politics.

hallmark

Definitely good to see a lower inflation figure than expected (obviously most of the reduction was guaranteed but still a better figure than predicted).  The downside is this will certainly be all the ammunition Andrew Bailey needs to stop raising interest rates (even though inflation is still over 200% of target).  Not only that but I expect him to start reducing them far sooner than is currently being predicted.  We're far from out of the woods with inflation and nobody has much idea what direction it's heading after it hits around 4% (lots of predictions but none of them based on much more than guesswork that I've seen). The MPC are nailed on to do what they always do, ignore any inflation threat and return to the loose monetary policy at the earliest opportunity.  Furthermore the high-spending Tories are likely to be shortly replaced with the even higher-spending Labour party.  There is zero chance they appoint a hawkish MPC or do anything to pressure them in that direction.  Just a matter of time before rates are slashed and QT is abandoned for more QE. IMO anyways

Thumbs_Up

pecunianonolet said:

Thumbs_Up said:

Malthusian said:

Thumbs_Up said:

The Tories will keep the triple lock state pension ....for now, but you won’t get your 8.5% rise as predicted a month ago.

It's not clear if you're making a political prediction or misunderstanding how the triple lock works.
The triple lock calculation is done in September so the figures are already known. It makes no difference how inflation moves after that point. The expected 8.5% increase is based on the earnings index anyway. CPI inflation was 6.7%.
The Government could of course still decide to change the basis for the calculation; the House of Commons library suggests they could reduce the increase to 7.8% by excluding bonuses from the average earnings index calculation.

We will have to wait for the autumn statement to see how the Tories play their hand, unaffordable or not the election is next year. 

... and hopefully the election is sooner than later. 

Politics, house prices, and WW2 chit-chat are taboo subjects on here, fair enough, but permit me to say this, our country will continue the steady decline whoever wins office. 

Strummer22

hallmark said:

We're far from out of the woods with inflation and nobody has much idea what direction it's heading after it hits around 4% (lots of predictions but none of them based on much more than guesswork that I've seen). 

I'll give you something not based entirely on guesswork then. Month on month (MoM) inflation (from https://tradingeconomics.com/united-kingdom/inflation-rate-mom):



Since June the MoM figures have fluctuated between -0.4% and 0.5%. Here's where I do have to admit to some guesswork: assuming no external shocks, I guess there's no reason that this will change much in the next several months, i.e. I expect the next several (up to 6-7 months) MoM figures to average out between 0.1 - 0.2%.

With the next three MoM that will drop out of the annual figure being 0.4%, 0.4% and -0.6%, there will be little change in the headline annual rate for the next 3 months. When Jan 2024's number is released in February, annualised inflation might actually go up a bit (probably remaining close to 5%) - causing wailing and gnashing of teeth in some quarters where the annual calculation is not fully understood. But I digress. From that point onwards the annual rate will drop significantly. Annualised inflation will be about 4% in February (i.e. data released in March), 3.5% in March, 2.5% in April and 2% in May. Similar (albeit potentially less spectacular) falls will be seen in core inflation as the peak MoM values also occurred in Feb - May 2023 and will drop out of the annual calculation.

Happy to revisit this post in due course and see how I did. 

Thumbs_Up

pecunianonolet will be disappointed if your figures above come to fruition, more the reason the Tories won't call a early election. 

hallmark

Strummer22 said:

hallmark said:

We're far from out of the woods with inflation and nobody has much idea what direction it's heading after it hits around 4% (lots of predictions but none of them based on much more than guesswork that I've seen). 

I'll give you something not based entirely on guesswork then. Month on month (MoM) inflation (from https://tradingeconomics.com/united-kingdom/inflation-rate-mom):



Since June the MoM figures have fluctuated between -0.4% and 0.5%. Here's where I do have to admit to some guesswork: assuming no external shocks, I guess there's no reason that this will change much in the next several months, i.e. I expect the next several (up to 6-7 months) MoM figures to average out between 0.1 - 0.2%.

With the next three MoM that will drop out of the annual figure being 0.4%, 0.4% and -0.6%, there will be little change in the headline annual rate for the next 3 months. When Jan 2024's number is released in February, annualised inflation might actually go up a bit (probably remaining close to 5%) - causing wailing and gnashing of teeth in some quarters where the annual calculation is not fully understood. But I digress. From that point onwards the annual rate will drop significantly. Annualised inflation will be about 4% in February (i.e. data released in March), 3.5% in March, 2.5% in April and 2% in May. Similar (albeit potentially less spectacular) falls will be seen in core inflation as the peak MoM values also occurred in Feb - May 2023 and will drop out of the annual calculation.

Happy to revisit this post in due course and see how I did. 

I hope your predictions are accurate

pecunianonolet

Thumbs_Up said:

pecunianonolet said:

Thumbs_Up said:

Malthusian said:

Thumbs_Up said:

The Tories will keep the triple lock state pension ....for now, but you won’t get your 8.5% rise as predicted a month ago.

It's not clear if you're making a political prediction or misunderstanding how the triple lock works.
The triple lock calculation is done in September so the figures are already known. It makes no difference how inflation moves after that point. The expected 8.5% increase is based on the earnings index anyway. CPI inflation was 6.7%.
The Government could of course still decide to change the basis for the calculation; the House of Commons library suggests they could reduce the increase to 7.8% by excluding bonuses from the average earnings index calculation.

We will have to wait for the autumn statement to see how the Tories play their hand, unaffordable or not the election is next year. 

... and hopefully the election is sooner than later. 

Politics, house prices, and WW2 chit-chat are taboo subjects on here, fair enough, but permit me to say this, our country will continue the steady decline whoever wins office. 

Thumbs_Up said:

pecunianonolet will be disappointed if your figures above come to fruition, more the reason the Tories won't call a early election. 

An early general election would be good because markets have lost a lot of trust in the current one with constant reshuffles, mini budgets, U turns from the U turns, Covid handling, debt, and the list goes on and on and on. 

Some sort of continuity and trust in a working government is needed and that comes with getting a legitimate mandate for whoever wins office. That stability will calm markets, that in turn has an influence on many things and can help with fiscal politics because monetary politics alone won't solve the issue.

Further decline, absolutely with you. 

Malthusian

pecunianonolet said:

Some sort of continuity and trust in a working government is needed and that comes with getting a legitimate mandate for whoever wins office. That stability will calm markets, that in turn has an influence on many things and can help with fiscal politics because monetary politics alone won't solve the issue.

A hung parliament in 2024 it is then ;-)

Altior

This country, and most of the West is in a similar space, due to the population not being able to swallow a State that only spends what it collects in tax revenues. U turns are an inevitable outcome of the 'power' and influence of social media. A small, but very loud subsection of the general population. I cannot see a plausible government of any rosette being less susceptible to being pushed around by the daily news feed, and trying to micro manage negative headlines.

Any policy, simply mooted or suggested that involves reducing spending gets immediate kickback. Just see what happens for example if there is an inkling of permanently ending the triple lock, or making it harder for people to not work for their living. This will not change with a new party in charge, although one of the duopoly parties has a historical reputation for spending even more money than it takes in, and they are not at the helm currently. 

Monetary policy is theoretically independent, the reality is pretty much every G20 country is committed to following the Fed. Due everyone sitting on a debt pile that will never be cleared down, at least not in my lifetime. It will be a shock if I ever get to see us not adding to it. 

talexuser

Altior said:

 one of the duopoly parties has a historical reputation for spending even more money than it takes in, and they are not at the helm currently. 

The problem for the imcumbents is that their reputation has been comprehensively trashed, with the highest taxes ever with the worst public services. Starmer, if as likely he wins, will have too much anticipation of being able to change things swiftly with no money to achieve much. Will "stability" be enough to slow the decline?