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Deflation news

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    Deflation news

    Inflation could go higher if workers demand pay increases, Mervyn King warns



    His warning came in a letter to George Osborne, the Chancellor, as the Bank unveiled a sharp rise in inflation, taking some economists by surprise.

    The annual rate of inflation, as measured by the Consumer Prices Index (CPI), rose to 4.5 per cent in April, up from 4 per cent in March.

    The rise was due to a jump in transport costs, particularly Easter rises in air and sea fares, and alcohol and tobacco, which were hit by large increase in duties, levied in the Budget.

    Mr King also said the decision by Mr Osborne to raise VAT from 17.5 per cent to 20 per cent was a significant factor in why inflation was so high. CPI is now at its highest level since October 2008.

    It was not just the price of petrol that increased transport costs; the price of plane and ferry tickets also jumped. The Office for National Statistics said "by far the largest upward effect" on prices came from air transport, where fares rose by 29 per cent between March and April. Sea fares rose by 22.3 per cent.

    More from the source: Inflation could go higher if workers demand pay increases, Mervyn King warns - Telegraph

    ---

    AtW's comment: it's as if Merv is based on Alpha space station and he reports to ze Chancellor things that he observes neutrally from far away. It's his job to deal with inflation - it's not like we are talking about some small numbers here, the delta between interest rates and official inflation is now 900%.

    At the end of article someone suggests that Bank can make matters worse by increasing rates but FFS, those households that can't handle increase of rates from 0.5% to 1-2-3% when they borrowed money when rates were 5%+, they totally deserve to go bust - the longer such crazy low rates are kept, the more people will borrow money and later this problem will be for real.

    Why is that man still in the job? (rhetorical question).
    Last edited by AtW; 18 May 2011, 00:09.

    #2
    I thought you were going to tell us that Flossy had a puncture
    Doing the needful since 1827

    Comment


      #3
      They haven't blamed windier than average May for the inflation increase then. Anything but the record low interest rates, which likely will be maintained at today's announcement. The only inflation they fear is wage inflation, so thank goodness for mass immigration.

      Comment


        #4
        What's a bit surprising is the general belief in the officially cooked-up inflation rate. I've noticed some politicians even talk as if they believe their own fiddled figures. And yet when these people go to the shops they can see that prices are rising at a rate that's in double or triple figures.

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          #5
          Originally posted by zeitghost
          Ah.

          The dear dead days beyond recall when interest rates were in double figures.
          I remember 2100% annual inflation, prices doubling every month, cards for bread...

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            #6
            Originally posted by AtW View Post
            Inflation could go higher if the Government demand tax increases, ...
            FTF Mervyn

            Bumping VAT up to 20% probably increased inflation significantly on its own.
            Work in the public sector? Read the IR35 FAQ here

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