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AtW
13th July 2010, 09:59
UK inflation slowed to 3.2% in June from 3.4% in May, its second monthly fall.

Source: BBC News - UK inflation slows again in June (http://news.bbc.co.uk/1/hi/business/10611668.stm)

Paying £1.30 for liter of diesel (BP ultimate) FFS! :mad

HairyArsedBloke
13th July 2010, 10:25
Sorry, I'm not really having a go at YOU, but your post is very funny.

You rant about the price of something that is part of non-core CPI that has held down the main CPI figure.

The real story is in the core-CPI figure that is going up very fast.

shaunbhoy
13th July 2010, 11:09
A massive fall of 0.2%

:laugh :laugh :laugh

centurian
13th July 2010, 11:12
Except that the other measure - which includes the things we actually have to buy (fuel, food) - went up this month to 3.9%

HairyArsedBloke
13th July 2010, 11:31
Except that the other measure - which includes the things we actually have to buy (fuel, food) - went up this month to 3.9%

Which is?

For the official stats: sminki (http://www.statistics.gov.uk/pdfdir/cpi0710.pdf)

Food and fuel are non-core items (i.e. stuff that the government can do frack-all about; that is why it doesn't target it).

As I said, the real story is the core-CPI rate that went up from 2.9% to 3.1%, the highest rate in the history of the series.

Doggy Styles
13th July 2010, 11:49
As I said, the real story is the core-CPI rate that went up from 2.9% to 3.1%, the highest rate in the history of the series.So is it a massive fall of 0.2% as AtW says, or a massive rise of 0.2%?

I need to know how to pitch my rant.

AtW
13th July 2010, 11:54
"massive" was sarcasm - inflation is rampart and "independent" BoE won't pull a finger out to do something about it :mad

HairyArsedBloke
13th July 2010, 12:02
"massive" was sarcasm - inflation is rampart and "independent" BoE won't pull a finger out to do something about it :mad

Aye. :mad Indeed.

Doggy Styles
13th July 2010, 13:49
"massive" was sarcasm - inflation is rampart and "independent" BoE won't pull a finger out to do something about it :madI see.

What should the BoE do then?

doodab
13th July 2010, 13:52
I see.

What should the BoE do then?

They could raise interest rates.

Doggy Styles
13th July 2010, 14:15
They could raise interest rates.Can they? I thought that was the MPC's responsibility, which includes non-bank members.

doodab
13th July 2010, 14:25
Can they? I thought that was the MPC's responsibility, which includes non-bank members.

It includes non-bank members, but it's generally considered part of the BoE AFAIK.

AtW
13th July 2010, 14:46
Can they? I thought that was the MPC's responsibility, which includes non-bank members.

Bank of England | Monetary Policy | Monetary Policy Committee (MPC) (http://www.bankofengland.co.uk/monetarypolicy/overview.htm)

"Interest rates are set by the Bank’s Monetary Policy Committee. The MPC sets an interest rate it judges will enable the inflation target to be met. The Bank's Monetary Policy Committee (MPC) is made up of nine members – the Governor, the two Deputy Governors, the Bank's Chief Economist, the Executive Director for Markets and four external members appointed directly by the Chancellor. The appointment of external members is designed to ensure that the MPC benefits from thinking and expertise in addition to that gained inside the Bank of England."

So much for independence when 30% of votes directly appointed by the Govt and they only need to convince 3 out of 9 to get Govts way.

Fighting inflation is primary job of BoE with primary tool being rates. They totally abused their position by dropping them to effective negative rates.

It was not independent from day 1 - this only became obvious though when they had to drop rates when Govt needed it.

Banks now pay 0.05% on savings accounts, yet they still lend at 5-7% (or more), there was never a time when they had such massive margins.

Doggy Styles
13th July 2010, 21:47
So much for independence when 30% of votes directly appointed by the Govt... 9 members, of which 4 are appointed, I make that 44%


...they only need to convince 3 out of 9 to get Govts way. I calculate they only need to convince one.

Now, from what you have said about government controlling the MPC, don't you agree that you blaming the BoE itself is harsh?

When the government set up the MPC, they gave it the remit to use the base rate to keep inflation within the window of 2% to 3%, which they did pretty well until Gordon's economic house of cards collapsed a couple of years ago.

Whether their remit was right or not is another matter, but few moaned about it until they realised that house prices had got a bit high.

AtW
13th July 2010, 22:05
9 members, of which 4 are appointed, I make that 44% I calculate they only need to convince one.

I stand corrected.

The situation is even worse than I thought! :eek


Now, from what you have said about government controlling the MPC, don't you agree that you blaming the BoE itself is harsh?

BoE takes full responsibility as it's technically "independent" - they can't even say "they were ordered to drop rates".


When the government set up the MPC, they gave it the remit to use the base rate to keep inflation within the window of 2% to 3%, which they did pretty well until Gordon's economic house of cards collapsed a couple of years ago.

They had no right to drop rates to nearly zero - effectively negative rates, inflation technically is around 3%, if anything they should have increased rates, but they dropped them because Govt wanted so - so much for independence.

If they did jack up rates then house pricing bubble would have burst long time ago and recovery would have happened by now, something that ain't going to happen because finally prices are going to start falling I and reckon we'll see double dip.

Naturally Labour will blame it on Cons...

Doggy Styles
13th July 2010, 22:19
They had no right to drop rates to nearly zero - effectively negative rates, inflation technically is around 3%, if anything they should have increased rates, but they dropped them because Govt wanted so - so much for independence. They dropped them that low when the economy went pear-shaped, in a change of government policy, in order to encourage spending rather than risk the economic meltdown that was feared if rates went up.


If they did jack up rates then house pricing bubble would have burst long time ago and recovery would have happened by nowHouse prices weren't part of their remit, so they couldn't jack them up.

Look, economics is not an exact science, except in hindsight, and nobody has all the answers so it is pointless talking about what the MPC should and should not have chosen to do at various times.

The MPC had their terms of reference and they stuck to them until the government said otherwise. For better or for worse, we elect a goverment to form policy on such things, we do not elect the BoE.

The only cast-iron given is that you should not spend more than you can afford to, and the last government cause most of our problems by doing that in spades. It doesn't need an economist to tell us that.

AtW
13th July 2010, 22:53
They dropped them that low when the economy went pear-shaped, in a change of government policy, in order to encourage spending rather than risk the economic meltdown that was feared if rates went up.

It's not BoEs job to do so - they effectively acted out of their own remit and should be all fired, possibly jailed for active disregard for their own mission - tackling inflation.

Frankly they should have been in jail long time ago for ignoring house pricing boom - excluding mortgages from inflation was totally wrong.


House prices weren't part of their remit, so they couldn't jack them up.

They were a danger to economy and rates set by BoE had direct effect on lending - they totally failed to control real inflation that should have included house prices into account.


Look, economics is not an exact science, except in hindsight, and nobody has all the answers so it is pointless talking about what the MPC should and should not have chosen to do at various times.

It was obvious that allowing house prices to go so much up would create a bubble - it's not first time it happened ffs, many times already in the last 50 years alone.


The MPC had their terms of reference and they stuck to them until the government said otherwise. For better or for worse, we elect a goverment to form policy on such things, we do not elect the BoE.

If BoE was truly independent as Govt says then it would not have mattered - clearly they are not, I never "bought" this suggestion that they were but last few years clearly demonstrated they were not independent in any shape or form.


The only cast-iron given is that you should not spend more than you can afford to, and the last government cause most of our problems by doing that in spades. It doesn't need an economist to tell us that.

BoE is responsible by not increasing rates to deal with house pricing bubble - rates should have been jacked up as high as necessary to ensure house prices don't go far away from common sense, they failed to do that saying it's not their job, however they dropped rates to near zero in order to keep house pricing bubble high up ffs.

shaunbhoy
14th July 2010, 06:36
It's not BoEs job to do so - they effectively acted out of their own remit and should be all fired, possibly jailed for active disregard for their own mission - tackling inflation.

Frankly they should have been in jail long time ago for ignoring house pricing boom - excluding mortgages from inflation was totally wrong.



They were a danger to economy and rates set by BoE had direct effect on lending - they totally failed to control real inflation that should have included house prices into account.



It was obvious that allowing house prices to go so much up would create a bubble - it's not first time it happened ffs, many times already in the last 50 years alone.



If BoE was truly independent as Govt says then it would not have mattered - clearly they are not, I never "bought" this suggestion that they were but last few years clearly demonstrated they were not independent in any shape or form.



BoE is responsible by not increasing rates to deal with house pricing bubble - rates should have been jacked up as high as necessary to ensure house prices don't go far away from common sense, they failed to do that saying it's not their job, however they dropped rates to near zero in order to keep house pricing bubble high up ffs.

Oh give it a rest Alexei. You are just miffed because you missed the boat on buying a house and are still stuck in a bedsit. You could not give two hoots about the economy, this is all about poor old you. Here, take an "Official Member of the Bedwetters" Badge to cheer you up!

Doggy Styles
14th July 2010, 08:19
Alexei, you still do not understand how things work in a democracy.

1. We elect a government to decide fiscal policy.

2. The bank does what it is told according to that policy.

3. Ergo, any arguments you have about interest rates, take them to the government, not the BoE.

I hope this helps.

AtW
14th July 2010, 10:12
1. We elect a government to decide fiscal policy.

Policy is to have low inflation, it has not changed for a long time - interest rates are a macroeconomic tool designed to deal with this problem, since BoE is supposedly independent it is not the Govt that should be responsible in any way for setting rates.


2. The bank does what it is told according to that policy.

The bank is supposedly independent.


3. Ergo, any arguments you have about interest rates, take them to the government, not the BoE.

BoE is responsible for interest rate policy decisions that should keep inflation low (under 2%).

The reality of course is that BoE's "independence" is a sham.

OwlHoot
14th July 2010, 10:18
Policy is to have low inflation

How do you know?

That may be the stated policy, and may have been true until recently, but the overriding priority must be to get on top of the deficit and debt.

So for all we know the Government may be secretly quite comfortable with slightly higher inflation for now, while publicly saying they are striving to reduce it.

AtW
14th July 2010, 10:25
How do you know?

I have not seen any official decisions saying that inflation can be much greater than previous values (around 2%).


So for all we know the Government may be secretly quite comfortable with slightly higher inflation for now, while publicly saying they are striving to reduce it.

High inflation means bigger Govt spending on indexing public sector pay, pensions etc - if anything Govt is very interested in keeping inflation low.

What's political is that raising rates would do to house bubble what should have happened long time ago - politically it is a very difficult thing to do, so BoE was forced to get rates to the ground, something that is a clear proof that they are NOT independent.

Doggy Styles
14th July 2010, 10:33
Policy is to have low inflation, it has not changed for a long time - interest rates are a macroeconomic tool designed to deal with this problem, since BoE is supposedly independent it is not the Govt that should be responsible in any way for setting rates.

The bank is supposedly independent.

BoE is responsible for interest rate policy decisions that should keep inflation low (under 2%).

The reality of course is that BoE's "independence" is a sham.You really don't comprehend, do you.

The BoE is not independent. It is not a sham, because it never has been and it doesn't pretend to be.

So, you blaming the BoE for not taking unilateral action on base rates to cool house prices, when the government is telling it to do something else, is stupid.

AtW
14th July 2010, 10:49
So, you blaming the BoE for not taking unilateral action on base rates to cool house prices, when the government is telling it to do something else, is stupid.

Yes, rates should have gone up BEFORE the collapse of banks even happened to cool down house price market.

shaunbhoy
14th July 2010, 20:04
Yes, rates should have gone up BEFORE the collapse of banks even happened to cool down house price market.

Yes, thank you Adam Smith!!

:laugh :laugh :laugh