Bank of England Governor Sir Mervyn King to issue seventh inflation apology in a row

[AtW]

The quarterly correspondence between the Governor of the Bank of England and the Chancellor has become a regular event as inflation has been above target for most of the last three years. The Office for National Statistics is expected on Tuesday to reveal that the consumer prices index of inflation in July was 4.3pc, a slight increase on June's 4.2pc but more than double the Bank's 2pc target.

The Governor has to explain why the Bank is not responding if inflation moves more than one percentage point above or below the target.

Last week, Sir Mervyn repeated that the Bank now expects inflation to rise above 5pc in the next few months before coming down sharply next year. He is expected to explain in his letter that underlying inflation in the UK is very weak, with most of the price rises caused by external factors, and that in the medium term inflation will be back in the target range.

More of this tulip apology from the source: Bank of England Governor Sir Mervyn King to issue seventh inflation apology in a row - Telegraph

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[TimberWolf]

I thought 5%+ was the target. It earned him a knighthood.

[AtW]

If he keeps get rewarded for utter failures of doing his job properly then it won't take him long to be proclaimed King.

[Doggy Styles]

If he keeps get rewarded for utter failures of doing his job properly then it won't take him long to be proclaimed King.

So AtW,

What would you do in Mervyn King's place?

[MarillionFan]

4.3% inflation.

Glad I took out those tax free RPI + 0.5% National Saving bonds.

[AtW]

What would you do in Mervyn King's place?

That would depend on time period. Is it now? Is it 5 years ago? Is it 1997 when he joined "independent" monetary policy committe? Is it 1948 when he was born?

Be more specific and I might just grace you with the answer worth remembering.

[Gonzo]

Last week, Sir Mervyn repeated that the Bank now expects inflation to rise above 5pc in the next few months before coming down sharply next year. He is expected to explain in his letter that underlying inflation in the UK is very weak, with most of the price rises caused by external factors, and that in the medium term inflation will be back in the target range.

More of this tulip apology from the source: Bank of England Governor Sir Mervyn King to issue seventh inflation apology in a row - Telegraph

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Get with the programme AtW.

This is deliberate - inflation is slowly eroding the UK's debts. Rising household bills are taking money out of consumers' pockets in exactly the same way that an increase in interest rates would have done. The inflation is not driven by demand at the moment so it will not respond to interest rate rises which would drive up the currency, stifle exports and result in deflation.

They'll get away with it too, at least while the labour market and pay settlements remain subdued. Once that changes watch out.

It will be interesting to see if they get that call right. Could be in for some serious stagflation if they don't.

[Old Greg]

Inflating the debt away is the only answer.

[AtW]

It's not only the debt that gets devalued you cretins - salaries ain't going anywhere and 4 years on 5% of inflation is equivalent to additional 20% tax only the money ain't received by the Treasury: such massive fall in living standard is offset somewhat for home owners by keeping BoE rate low, however everyone else is fooked right now and once wage spiral starts (sooner or later) it will be pretty impossible to stop it.

If I run BoE a decade ago I'd increase rates high enough to prevent house bubble from occurring.

If I run BoE now I'd get rates high up at start of bubble burst to make sure it fully deflates and does not get inflated anymore.

Now a more interesting question what I'd do if I was running the Army

[DimPrawn]

It's not only the debt that gets devalued you cretins - salaries ain't going anywhere and 4 years on 5% of inflation is equivalent to additional 20% tax only the money ain't received by the Treasury: such massive fall in living standard is offset somewhat for home owners by keeping BoE rate low, however everyone else is fooked right now and once wage spiral starts (sooner or later) it will be pretty impossible to stop it.

Read it and weep AtW!

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