Inflation watch

[BritDownUnder]

I think there is an argument that rises in productivity in the last 40 years have not been given to the workers. Others such as Piketty say that returns on capital are now exceeding wage growth. I think the 'offshoring' of a lot of industries has something to do with it as well.

I doubt that bosses will give anything unless they are told to by shareholders or forced to by governments.

[clv101]

US inflation to 6.8%, hold on to your hats! If you've got any cash best spend it while it's still worth something.

[PS_RalphW]

Bank of England raises base rate to 0.25%

Probably several months late but at least it is a signal of intent.

[Potemkin Villager]

They're shitting their pants.

[kenneal - lagger]

Raising interest rates will only make things worse for most people. The price rises we are suffering, mainly energy related, aren't going to be affected by a rate rise as they are an international problem. Because most people have seen their energy costs rise, doubling in some cases, they have less money to spend and so demand drops along with price rises on goods. An interest rate rise isn't going to affect increased wage demands although it will affect business's ability to pay. Meanwhile the rate rise will impinge on the money that most people have to buy the important things of life like food: they won't be buying many goods which again is going to reduce any price inflation.

All the BOE are doing with a rate rise is depressing the economy even further than it will be depressed by high fuel prices. It just goes to show how out of touch our economists are!

[clv101]

Yes, all true. There is another dimension, international. There might come a time when we need to increase the interest rate to support the value of the pound. A devaluing pound would be very dangerous for our import based economy.

[UndercoverElephant]

Bank of England raises base rate to 0.25%

Probably several months late but at least it is a signal of intent.

Moving the stable door one inch after the horse has bolted.

[PS_RalphW]

Raising interest rates raises the exchange rate of pound to the dollar. Oil is sold in dollars. It makes energy bills in the UK lower. Only a small percentage of UK mortgage holders are on variable rate mortgages. Interest rates on credit cards are so high already that a 0.15% rise will hardly register. (Not that the rates are that closely linked to the base rate). This is largely a pointer to the international money markets.

[adam2]

A large part of the present inflation is due to increased natural gas and electricity prices, and to lesser extent increased petrol and diesel prices.

How long until the government introduce a new measure of inflation that excludes fuel costs.

[UndercoverElephant]

I believe the primary cause of this inflation is 12 years of money-printing. It has taken a long time to break out of asset bubbles into the real economy, but the dam has now well and truly burst.

[UndercoverElephant]

https://www.theguardian.com/commentisfr ... nomic-pain

When forecasters go on strike, it’s because they know which way the wind is blowing. Unite members working for the National Institute of Economic and Social Research look set to vote to strike over a 2% pay offer, as figures released yesterday show inflation reaching 5.1%. How wise of them to belong to a union, and how wise to use that muscle in the face of further inflation rises. On the old RPI measure, inflation is 7.1%.

It’s not caused by rising pay, which is running at below 4%, but by petrol prices, which have shot up by a third...

It is being caused by money-printing!!!

[UndercoverElephant]

Just found this on the bank of england website:

https://www.bankofengland.co.uk/monetar ... ive-easing

Does quantitative easing help to pay for government spending?

QE lowers the cost of borrowing throughout the economy, including for the government. That’s because one of the ways that QE works is by lowering the bond yield or ‘interest rate’ on UK government bonds.

But that’s not why we do QE. We do it to keep inflation low and stable and support the economy.

And that aim is what will make us to decide when and how to stop doing QE, or even selling some of the bonds we hold, if that’s needed to keep inflation low and stable.

Yes, you read that correctly. The Bank of England isn't printing money to pay for government spending. Oh no. They are doing it to keep inflation low and stable. Printing money to keep inflation down.

"Through the looking glass" doesn't quite do it justice.

[clv101]

https://www.theguardian.com/business/20 ... -pressures

Significantly price hikes at IKEA.

[UndercoverElephant]

Soaring energy bills and rising taxes prompted 2022 to be dubbed the “year of the squeeze” by a thinktank report published this week.

Yes, 2022 is going to be when inflation really starts to bite. Interest rates will go up and that is going to cause problems for anybody with variable-rate debts, taxes will have to go up in an attempt to make it at least look like there's a commitment to get back into fiscal balance. And everybody's energy bills are going to go much higher.

[BritDownUnder]

I would like to know where all that extra money goes, whether to wages, or to corporate profits. That will be the clincher.

And Happy New Year BTW. It will an interesting one.