Inflation watch

[UndercoverElephant]

https://www.reuters.com/world/uk/bank-e ... 022-05-04/

LONDON, May 5 (Reuters) - The Bank of England sent a stark warning that Britain risks a double-whammy of a recession and inflation above 10% as it raised interest rates on Thursday to their highest since 2009, hiking by quarter of a percentage point to 1%.

The BoE also said it would work on a plan to start selling the government bonds it has bought since that crisis, which currently stand at just under 850 billion pounds ($1.05 trillion).

It is going to work on a plan? As in...it doesn't already have one??

[UndercoverElephant]

https://www.euronews.com/2022/05/05/inf ... -year-high

Turkey's cost of living crisis is growing after official data showed that inflation in the country rose to nearly 70%.

Skyrocketing prices have placed significant pressure on households and ramped up criticism of President Recep Tayyip Erdogan head of next year's election.

Consumer prices rose by 69.97% in April compared with the previous year, according to the Turkish Statistical Institute. It represents the largest year-on-year increase in two decades since 2002.

The biggest price increases in Turkey last month were in the transportation sector (106%) followed by food and non-alcoholic beverage prices (89%), according to the data.

Critics have blamed the soaring prices on Erdogan’s economic policies, which favour lowering interest rates to boost growth and exports.

The only way is up...baaaaaybeeeey.....for you and me now....

[UndercoverElephant]

https://www.conservativehome.com/thecol ... rm-it.html

This week sees the Bank of England celebrate 25 years of independence. Quite rightly, the current rise in inflation has raised questions about whether it is time to reassess its remit and governance.

There has been a rise in inflation across western economies. That this is more than a UK issue should not divert attention from where the problem lies.

If you are driving a car and approach a red light and decide to not only ignore the signal to stop but put your foot down on the accelerator, you are driving dangerously. That some other cars may do the same does not change that fact. It is not safety in numbers, but is more likely to cause greater carnage

Harold Wilson, Edward Heath and Jim Callaghan all lost elections because of their inability to control inflation. A central feature of the two general election campaigns in 1974, and even of that of 1979, was the use of a shopping basket to show how the Government had failed. Don’t be in any doubt as to who pays the price for a failure to control inflation.

[Potemkin Villager]

Harold Wilson, Edward Heath and Jim Callaghan all lost elections because of their inability to control inflation. A central feature of the two general election campaigns in 1974, and even of that of 1979, was the use of a shopping basket to show how the Government had failed. Don’t be in any doubt as to who pays the price for a failure to control inflation.

Bit ambiguous this - whilst it is Joe Public who actually pays the price I think this is of concern only as far as it impacts
on the incumbent political party rather than Joe Public. Who said something about the hammer of interest rate changes being applied by folk
who consider all economic problems to be nails?

[UndercoverElephant]

Harold Wilson, Edward Heath and Jim Callaghan all lost elections because of their inability to control inflation. A central feature of the two general election campaigns in 1974, and even of that of 1979, was the use of a shopping basket to show how the Government had failed. Don’t be in any doubt as to who pays the price for a failure to control inflation.

Bit ambiguous this - whilst it is Joe Public who actually pays the price I think this is of concern only as far as it impacts
on the incumbent political party rather than Joe Public.

It is an intentional play on words I think. Both meanings are implied. It is a warning to the tory party membership.

[BritDownUnder]

Reminds me of a cartoon in one of my school textbooks.

A cartoon of a political speech with a huge speaker being introduced as “The Right Honourable Sir Rising Price, the Minister for Inflation”.

[mr brightside]

Waitrose corn fed chicken breast, the nicer stuff, up from 16.99/kg to 21.99/kg. That's a big jump.

[UndercoverElephant]

https://www.bbc.co.uk/news/business-61804877

The US central bank has announced its biggest interest rate rise in nearly 30 years as it ramps up its fight to rein in soaring consumer prices.

The Federal Reserve said it would increase its benchmark rate by three quarters of a percentage point to a range of 1.5% to 1.75%.

The rise, the third since March, comes after inflation surged unexpectedly last month.

More rises are likely, the bank said.

Forecasts released after the meeting showed officials expect interest rates could reach 3.4% by the end of the year, a move that will ripple out to the public in the form of higher borrowing costs for mortgages, school loans and credit cards.

[kenneal - lagger]

I can see that increasing interest rates will reduce inflation when that inflation is caused by an excess of money in the system but that is not the case now. Current inflation is being caused by a shortage of energy and other resources. Money is already tight for most people so increases in the interest rate are only going to increase costs further and add to inflation.

The increased rate is not going to depress demand much as demand is already depressed by the high costs. This just shows that economists and bankers are completely divorced from the plebs. Either that or the financial system no longer serves the interests of ordinary people and is completely focused inwards.

[mr brightside]

I can see that increasing interest rates will reduce inflation when that inflation is caused by an excess of money in the system but that is not the case now. Current inflation is being caused by a shortage of energy and other resources. Money is already tight for most people so increases in the interest rate are only going to increase costs further and add to inflation.

The increased rate is not going to depress demand much as demand is already depressed by the high costs. This just shows that economists and bankers are completely divorced from the plebs. Either that or the financial system no longer serves the interests of ordinary people and is completely focused inwards.

When you say 'plebs' do you mean us, the people?

[UndercoverElephant]

https://www.bbc.co.uk/news/business-61814996

Food prices will rise quickly this summer due to soaring costs, grocery analysts have predicted.

Prices will rise at a rate of 15% as households pay more for staples such as bread, meat, dairy and fruit and vegetables, the Institute of Grocery Distribution (IGD) said.

More vulnerable people will skip meals, it warned.

It also predicted that prices would rise faster for longer than Bank of England estimates.

[UndercoverElephant]

I can see that increasing interest rates will reduce inflation when that inflation is caused by an excess of money in the system but that is not the case now. Current inflation is being caused by a shortage of energy and other resources. Money is already tight for most people so increases in the interest rate are only going to increase costs further and add to inflation.

I believe we currently have both cost-push inflation (as you describe) and demand-pull inflation. It's both.

https://www.economicshelp.org/blog/1683 ... inflation/

As this recent blog post explains, I think that raising interest rates will help to control inflation. It's not that it won't work - and it certainly won't make it worse - but that it will cause (or deepen) a recession, and ultimately that leads to a whole bunch of other economic problems (ie the government cannot balance its own books without raising taxes even further, or cutting services even further).

There's no way of "winning" in the current situation. The question is how things falls apart. Hyperinflation or perpetual stagflation? They are both catastrophic, but they are still very different paths into collapse. Hyperinflation eventually kills the monetary system. Perpetual stagflation keeps the monetary system going but still destroys people's lives. If the choice is made to raise interest rates to control inflation in the current situation then what we will get is perpetual stagflation. If interest rates are kept low, as you would like, then inflation will just keep rising.

But hey, I am no economist. I am just fascinated to see how this plays out.

[kenneal - lagger]

...............
When you say 'plebs' do you mean us, the people?

Yes. That's how the bankers and financiers see us, if they see us at all.

[clv101]

Turkey's cost of living crisis is growing after official data showed that inflation in the country rose to nearly 70%.

I bet, when most people read that, they simply think that Turkey is some distant, economic basket case with some strange funny-money currency. And that such a collapse in value could never happen to the UK and its fabulous Pound Sterling.

But it absolutely can. Our economy is built on sand.

[Potemkin Villager]

I thought it was built on FIRE!

The Turkish tourist board is currently spending a bomb on advertising luring folk there for fun in the sun.