Inflation, interest rates and The B word

[mauveiscurious]

To think that Brexit is to blame for the inflationary position we are in.

Laughably The Telegraph and other commentators blames Zelda yesterday

www.telegraph.co.uk/money/consumer-affairs/legend-of-zelda-computer-game-driving-inflation/

The US is already seeing inflation dropping as with the rest of Europe.

We are stuck in the position because of Brexit and the country is scared to say it.

I wanted to remain, however I don't think Brexit is the cause of all this as there are similar events globally. Brexit definitely makes it worse and will slow the recovery as it is more difficult to trade with our nearest geographic market. Also a good deal of the financial services have moved outside the UK.

Brexit is not THE cause of inflation. However, it IS most definitely a factor that should be accounted for. When you increase the costs and times for supply chains (imports) restrict labour (direct wage inflation), what do you expect?

That said, I have not seen anything that Brexit has made better, or anything bad that Brexit has not been able to make worse.

Some inflation is due to Brexit. Inflation at the lower paid end of the labour market is probably quite well correlated to Brexit - and in my opinion its a good thing that the lower paid and those who suffered because of the uncontrolled movement of labour within the single market (eg HGV drivers) are now being paid more.

Inflation in other things, no. Energy price increases have come about as a result of the Ukraine war. Energy prices feed into everything, food production (for example harvesting and fertilizer) and goods delivery charges and general business operations (for example chip shops use a lot of energy to heat the oil). Food price increases again probably dominated by the Ukraine war, both due to lack of food (sunflower oil and wheat for example) and also energy costs. If you look at European price inflation on food until recently the UK was actually quite a bit lower than Germany for example.

As regards US inflation dropping, they are less dependent on the rest of the world for food, and also are a large producer of energy. They raised rates faster and more aggressively than we did (relative to their inflation levels) which brought a smaller inflation problem under control earlier. The US got it better on the timing of the rises than we did, but ultimately we would have probably ended up in the same position we are now even if we had raised earlier. It's just people would have been complaining about the cost of mortgages in January rather than now. There's a whole other discussion of how woeful the BOE forecasting is and what needs to be done about it. I think at the very least yesterday Bailey needed to signal a strong intent about getting inflation under control after the earlier admission that the BOE models were useless. I think he succeeded in this.

So the TLDR is, yes a small proportion of it, but most of it comes from somewhere else.

Oh and I forgot to mention covid. But I have typed enough.

To think that Brexit is to blame for the inflationary position we are in.

I'm in Poland and inflation here is like the UK and we definitely didn't have brexit.

The new normal mortgage rate here is 9.5% and if you're remortgaging for home improvements the rate is around 11%.

There's a global issue with inflation partly driven by the war in Ukraine, the fallout from Covid, and the beginnings of the climate disaster (crop failures etc) but the situation in the UK is being exacerbated by Brexit and 13 years of Tory mismanagement. Not helped by the fact that the current government are basically powerless as Rishi is keen to not make any big moves that could potentially backfire and see his popularity diminish further.

As an aside, it is amusing to see how ridiculous some of the Telegraph headlines are becoming as more and more people wake up to the shitshow that is the Tory government. The Telegraph will almost print anything to try and shift the blame away from the Tories. The list includes the last Labour government (it's been 13 years), remote workers, the Woke, Gen Z, Millennials, immigrants, nurses, the French, etc etc. Unfortunately you know that there are people who are lapping it up.

It's the same accross most of Europe. Brexit hasn't helped but the main factors are energy costs (Ukraine), supply constraints (Ukraine again, COVID hangover) and labour market shortages (COVID hangover again)

I understand the war has been a major factor with energy, QE too as we have been holding back inflation for years. However Brexit has to be a major factor in our current scenario and our dependence on EU supply chains

@mauveiscurious Brexit is a factor in the UK becoming an economic backwater and the laughing stock of Europe, but the inflation is inline with similar economies so can't be a significant factor (when compared to everything else).

You are objectively wrong.

See here for an example :

https://www.bbc.co.uk/news/business-65962497

Latest results in that data the UK is higher.

But the 9 months previously it is lower.

"However Brexit has to be a major factor in our current scenario and our dependence on EU supply chains."

What evidence do you have that this statement is true ?

Unfortunately the tactic of "Blame Brexit for Everything" by making nebulous statements just isn't working anymore in persuading anyone who knows anything about economics.

Brexit is a big change (although the effects of it are happening very slowly). It's going to have effects on the economy. Some positive and some negative - you can search the internet for data on various sectors.

But overall at the moment effects of it seem to be less than many people anticipated, and certainly are difficult to deconvolve from the other effects of covid, the effects of the Ukraine war and the effects of US (global) macroeconomic policy.

Unfortunately (or fortunately depending on your perspective) Brexit has happened/occured at the same time a lot of other big things in terms of macroeconomic policy have happened. So separating the effect of it from these things is hard.

commonslibrary.parliament.uk/research-briefings/cbp-7851/

Hmm a fall in trade is in official documents in parliament 55% to 47% hardly "nebulous"

In fact, the UK's food inflation in April was higher than the European Union average of 16.4% and higher than all the major European economies." BBC

"The ONS says one reason the UK's prices have been rising faster for longer could be down to a reliance on food imports. This suggests European countries that grow more of their own food have seen smaller food prices increases."

We also don't have the labour to harvest the produce as free movement has put barriers in place for seasonal working

Obviously with the war, covid and QE it's tricky to untangle. We are harder to trade with which makes infinity harder.