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Politics

Inflation bites back with a vengeance

23 replies

longfingernailspaintedblue · 18/05/2010 10:08

CPI 3.7%
RPI 5.3%

"No more boom and bust"

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MintHumbug · 18/05/2010 10:14

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noddyholder · 18/05/2010 10:25

It is unbelievable.How can interest rates still be so low?If the RPI rose like that consistently it would be 12 by the end of the year! A normal rate of 5 or 6% would cause carnage

fembear · 18/05/2010 10:35

Inflation must be coming. CPI/RPI measure consumer inflation. Input price inflation measures how much extra it costs manufacturers. They will, in time, pass that cost on to you and me.

Input price inflation was 13.1% in April (was 10.3% in March)

MintHumbug · 18/05/2010 10:38

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longfingernailspaintedblue · 18/05/2010 10:42

fembear

Those numbers scare the hell out of me.

Are they mainly driven by the weakness of the pound?

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Chil1234 · 18/05/2010 10:49

It was bound to happen... low £, high raw material & fuel prices and industries needing to restock after running production down during the recession. Interest rates should start to increase which would be good news for savers who lost about 50% of their income in the last couple of years. Many people with mortgages (new borrowers, those locked into fixed rates, 'floors' applied to SVR) didn't benefit from the 0.5% base rate in the first place. Credit cards still charge 15%+ for outstanding balances etc.

fembear · 18/05/2010 10:50

Those figures were from the ONS. A lot of it is due to the price of imported metals.

sarah293 · 18/05/2010 10:55

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MintHumbug · 18/05/2010 11:21

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Callisto · 18/05/2010 11:38

It is scary. Fuel prices will continue to go up if the peak oil scenario is correct, and if oil is expensive it puts more cost onto everything, because everything relies on oil.

One good thing about a weak pound is that it is really helping British manufacturing atm.

Haliborange · 18/05/2010 11:42

It is hardly surprising.
The pound is so low that imports are very dear. Fuel prices also don't help - they have a knock on effect re the price of food etc.
However, interest rates are used to control inflation where it indicates an overheating economy. We have quite the opposite; an economy which is limping on in spite of these issues. The average Joe is feeling squeezed already and that is going to get worse.
That's why I doubt that interest rates will go anywhere significant anytime soon.

earthworm · 18/05/2010 12:54

Economist on BBC News this morning said that it was entirely due to VAT going back up to 17.5% and fuel, consequently would fall back again over next few months and would not influence interest rate decisions.

noddyholder · 18/05/2010 12:59

VAt will probably rise in teh emergency budget though as is being widely reported.They are full of excuses but this time it really feels like time is running out.GB only lowered IR and printed £ to save the housing market which was heading to oblivion

Haliborange · 18/05/2010 13:14

It doesn't matter (for interest rate purposes) if VAT increases. That won't be an indicator of an inflationary economy and may well have the opposite effect by curbing spending.

Grdon Brown did not cut interest rates. The independent Bank of England did that to try to stimulate growth. We still don't have growth so rates shouldn't be on the up just yet IMO.

noddyholder · 18/05/2010 14:17

It will matter if they change what VAT is added to though.

Coolfonz · 18/05/2010 15:15

It's nothing to do with any of this, interest rates are being kept low to subsidise private banking. It means they can make a profit lending to people/small business.

In the meantime it sucks liquidity out of savers/pensioners into the economy. Great if you are BP, shit if you are one of the pensioners who died last winter as a result. But who cares about them anyway?

Interest rates are being kept low to satisfy the banks (and their subsidiaries) multi-nationals...it is after all the banks that own your property if you have a mortgage on it. If you have an interest only mortgage you are almost a renter...

noddyholder · 18/05/2010 15:42

IO is renting without the perks really as you pay all the maintenance yourself!I think the days of IO are numbered.we are actively encouraged to be in debt and saving is pointless atm.

earthworm · 18/05/2010 15:47

I agree it is very hard for people relying on savings for income, but low interest rates at a time of depressed growth make sense. And I can't see how a low interest rate benefits banking at all - they add % to base rate when lending, no matter what base rate is, surely?

sarah293 · 18/05/2010 15:52

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Chil1234 · 18/05/2010 19:41

It's about 'making hay before it starts pissing down'.... and expectation setting. Get everyone used to a higher price and you can legitimately say 'no price rises due to VAT' when it actually happens. Spin is a marvellous thing!

The banks are benefiting from the low interest rate because they are keeping their debt-laden customers ticking over. If the base rate was back at 4% and they were charging 8, 9 or 10% on lending to make the same profit then they'd lose out because everyone would be in the bankruptcy court, defaulting like crazy.

Hope no-one here has debts BTW....

sarah293 · 19/05/2010 07:25

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Jaybird37 · 22/05/2010 20:16

Basically looks like the secondary banking crisis in the mid 70s - fuel crisis, debt and inflation...

I was just a child then but I remember my mother buying everything in bulk from the Cash and Carry to save money, because between buying one pack of loo rolls and the next the price had gone up.

The only thing that has kept inflation low this time around is all those lovely Polish builders and other immigrants keeping wages down.

MrsC2010 · 27/05/2010 21:49

Time to fix the mortgage then do you think?

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