Best of the Week
Most Popular
1. Dollargeddon - Gold Price to Soar Above $6,000 - P_Radomski_CFA
2.Is Gold Price On Verge Of A Bottom, See For Yourself - Chris_Vermeulen
3.Dow Stock Market Trend Forecast 2018 - Nadeem_Walayat
4.Gold Price to Plunge Below $1000 - Key Factors for Gold & Silver Investors - P_Radomski_CFA
5.Why The Uranium Price Must Go Up - Richard_Mills
6.Dow Stock Market Trend Forecast 2018 - Video - Nadeem_Walayat
7.Jim Rogers on Gold, Silver, Bitcoin and Blockchain’s “Spectacular Future” - GoldCore
8.More Signs That the Stock Market Will Rally Until 2019 - Troy_Bombardia
9.It's Time for A New Economic Strategy in Turkey - Steve_H_Hanke
10.Fiat Currency Inflation, And Collapse Insurance - Raymond_Matison
Last 7 days
Gold Exodus to Reverse - 22nd Sep 18
Bitcoin Trader SCAM WARNING - Peter Jones, Dragons Den Fake Facebook Ads - 22nd Sep 18
China Is Building the World’s Largest Innovation Economy - 21st Sep 18
How Can New Companies Succeed in the Overcrowded Online Gambling Market? - 21st Sep 18
Golden Sunsets in the Land of U.S. Dollar Hegemony - 20th Sep 18
5 Things to Keep in Mind When Buying a Luxury Car in Dubai - 20th Sep 18
Gold Price Seasonal Trend Analysis - Video - 20th Sep 18
The Stealth Reason Why the Stock Market Keeps On Rising - 20th Sep 18
Sheffield School Applications Crisis Eased by New Secondary Schools Places - 20th Sep 18
Precious Metals Sector: It’s 2013 All Over Again - 19th Sep 18
US Dollar Head & Shoulders Triggered. What's Next? - 19th Sep 18
Prepare for the Stock Market’s Volatility to Increase - 19th Sep 18
The Beginning of the End of the Dollar - 19th Sep 18
Land Rover Discovery Sport 'Approved Used' Bad Paint Job - Inchcape Chester - 19th Sep 18
Are Technology and FANG Stocks Bottoming? - 18th Sep 18
Predictive Trading Model Suggests Falling Stock Prices During US Elections - 18th Sep 18
Lehman Brothers Financial Collapse - Ten Years Later - 18th Sep 18
Financial Crisis Markets Reality Check Now in Progress - 18th Sep 18
Gold’s Ultimate Confirmation - 18th Sep 18
Omanization: a 20-year Process to Fight Volatile Oil Prices  - 18th Sep 18
Sheffield Best Secondary Schools Rankings and Trend Trajectory for Applications 2018 - 18th Sep 18
Gold / US Dollar Inverse Correlation - 17th Sep 18
The Apple Story - Trump Tariffs Penalize US Multinationals - 17th Sep 18
Wall Street Created Financial Crash Catastrophe Ten Years Later - 17th Sep 18
Trade Wars Are Going To Crash This Stock Market - 17th Sep 18
Why Is Apple Giving This Tiny Stock A $900 Million Opportunity? - 17th Sep 18
Financial Markets Macro/Micro View: Waves and Cycles - 17th Sep 18
Stock Market Bulls Prevail – for Now! - 17th Sep 18
GBPUSD Set to Explode Higher - 17th Sep 18
The China Threat - Global Crisis Hot Spots & Pressure Points - 17th Sep 18 - Jim_Willie_CB
Silver's Relationship with Gold Reaching Historical Extremes - 16th Sep 18
Emerging Markets to Follow and Those to Avoid - 16th Sep 18
Investing - Look at the Facts to Find the Truth - 16th Sep 18
Gold Stocks Forced Capitulation - 15th Sep 18
Hindenburg Omen & Consumer Confidence: More Signs of Stock Market Trouble in 2019 - 15th Sep 18
Trading The Global Future - Bad Consequences - 15th Sep 18
Central Banks Have Gone Rogue, Putting Us All at Risk - 15th Sep 18
Gold Price Seasonal Trend Analysis - 14th Sep 18
Growing Number of Small Businesses Opening – and Closing – In the UK - 14th Sep 18
Gold Price Trend Analysis - Video - 14th Sep 18
Esports Is Exploding—Here’s 3 Best Stocks to Profit From - 13th Sep 18
The Four Steel Men Behind Trump’s Trade War - 13th Sep 18
How Trump Tariffs Could Double America’s Trade Losses - 13th Sep 18
Next Financial Crisis Is Already Here! John Lewis 99% Profits CRASH - Retail Sector Collapse - 13th Sep 18
Trading Cryptocurrencies: To Win, You Must Know Where You're Wrong - 13th Sep 18
Gold, Silver, and USD Index - Three Important “Nothings” - 13th Sep 18
Precious Metals Sector On a Long-term SELL Signal - 13th Sep 18
Does Gambling Regulation Work - A Case Study - 13th Sep 18
The Ritual Burial of the US Constitution - 12th Sep 18
Stock Market Final Probe Higher ... Then the PANIC! - 12th Sep 18
Gold Nuggets And Silver Bullets - 12th Sep 18
Bitcoin Trading - SEC Strikes Again - 12th Sep 18

Market Oracle FREE Newsletter

Trading Any Market

UK Inflation Smashes Through 3%, Hits 3.5%, Bank of England Says Don't Panic!

Economics / Inflation Feb 16, 2010 - 04:35 AM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleThe inflation mega-trend continues to forcefully manifest itself in the continuing surge higher of UK Inflation as measured by the Consumer Price Index (CPI) which soared from 2.9% to 3.5% for January data. Inflation has virtually doubled in a little over 2 months rising from 1.9% for November data to now stand at 3.5%, the surge in inflation has caught the whole mainstream media and academic economists by surprise that barely 2 months ago were still contemplating deflation. The RPI continued its spike higher rising to 3.7% from 2.4% the month before, and the real UK inflation rate as measured by the Market Oracle rose from 2.7% to now stand at 4.3%.


Mervyn King, the Governor of the Bank of England was forced to write a letter to Alistair Darling to explain why he is incapable of doing his job i.e. keeping CPI inflation within the 1% and 2% band. The excuses contained within his latest letter include the VAT rise to 17.5% and rise in petrol prices, both of which he sees as highly temporary. Therefore it will be interesting to see what he writes in the letters to follow during the next 6 months as inflation stays above 3%.

My analysis since November has been warning of a spike in UK inflation as part of an anticipated inflation mega-trend (18 Nov 2009 - Deflationists Are WRONG, Prepare for the INFLATION Mega-Trend ) that culminated in the forecast of 27th December 2009 (UK CPI Inflation Forecast 2010, Imminent and Sustained Spike Above 3%) as the following updated graph shows today's inflation rate is virtually exactly inline with the forecast that continues to project towards a sustained trend of above 3% for most of the year :

During 2010 the workers of Britain will increasingly be squeezed by the twin forces of inflation and tax hikes that could spark the dreaded wage price spiral that the Bank of England so fears, hence the repeatedly soothing public words that soaring inflation is temporary whilst privately panicking that they have lost control of inflation. Workers under intense pressure could boil over during the summer into serious civil unrest on a scale not seen since the 1980's, especially after the next general election when the realisation dawns that Britain is EXACTLY where GREECE is in terms of the impact of the debt crisis and requirement for steep tax hikes and severe spending cuts.

Whilst the risk of wage price spiral is still some way off, which usually follows a prolonged period of worker discontent, i.e. a outbreak of strikes right across the country which so far to large extent has yet to materialise as a consequence of the high unemployment following the recession. Therefore the risks of a wage price spiral are more likely to occur during 2011 than 2010 as British workers are forced to endure the pain, the only outlet for which they have is the next General Election. However the government recognising this, is engaged in a policy of bankrupting Britain to minimise voter discontent.

Apart from hitting workers in terms of falling pay in real terms, inflation also eats into the real value of savings deposited at virtually ALL British banks and building societies that even now, are engaged in cutting the rates offered to savers to as little as 0.1%, as my earlier analysis illustrated (23rd Jan 2010 - UK Savers Losing Money on Virtually ALL Instant Access Savings Accounts) That virtually all accounts LOSE savers money in real terms AFTER inflation and AFTER the 20% Savings tax. That situation has now deteriorated even further as savers subsidise the bankster bonuses via loss of value of savings deposited in tax payer bailed out banks.

The Inflation Mega-Trend

The full implications of the unfolding inflation mega-trend including forecasts trends for major markets for many years are contained within the NEW Inflation Mega-trend ebook that I am making available for FREE, which includes analysis and precise forecasts for:

  • Interest Rates
  • Economy
  • Inflation
  • Gold & Silver
  • Emerging Markets
  • Stock Markets
  • Stock Market Sectors and Stocks, including ETF's
  • Natural Gas
  • Agricultural Commodities
  • House Prices
  • Currencies
  • Crude Oil

The 109 page ebook is being made available for FREE, the only requirement for which is a valid email address. To find out how to protect your wealth against the inflation mega-trend get your free copy of NEW Inflation Mega-Trend Ebook NOW (The ebook mailing is being staggered between 10th Feb and 18th Feb 2010 to manage high download demand).

UK Interest Rate Implications

The mainstream view is for little if any change in UK interest rates this year, this is illustrated by Roger Bootle of the Daily Telegraph continuing his assertions even as recently as last week that he expects UK interest rates to stay below 1% for the next 5 years.

However my in depth analysis of 13th January (UK Interest Rate Forecast 2010 and 2011 ) concluded with the following forecast:

UK Interest Rates Forecast 2010-11: UK interest Rates to Start Rising From Mid 2010 and Continue into end of 2010 to Target 1.75% / 2%, Continue Higher into Mid 2011 to Target 3%.

Subscribe Now to my always free newsletter to receive the Inflation Mega-Trend Ebook for FREE.

Source: http://www.marketoracle.co.uk/Article17274.html

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-10 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.

Nadeem Walayat Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

SC
16 Feb 10, 17:04
SC

It's probably the worst kept secret in the country that both parties plan to increase Vat from 17.5% to 20% after the next election. Bearing that in mind I'd say it is very optimistic of King to expect inflation to be within his targeted band.

It's awfully tempting to go into the banks and building societies and just take the cash out and tell them to talk about it with the BOE. I for one am running out of patience at subsidising other peoples mortgages ,cash for clunkers , the bankers yield curve. Basically having made prudent decisions I'm heartily sick of not getting my nose in the trough especially when I 'own' part of that trough.


DH
23 Mar 10, 04:52
interest rate and infaltion forecast

Naddem, Your UK inflation and interest rate forecast is looking embarrassing now. Your forecast of UK rate hikes for last year was wrong and will be wrong again this year. The BoE will keep rates at 0.5% for the rest of 2010.


Nadeem_Walayat
23 Mar 10, 09:49
Embarrasing ?

Embarrasing ?

I don't think so....

BoE wants to keep rates at 0.5%, but I expect it won't be allowed to do so.

As for last year, I warned that UK interest rates would start to crash lower when rates were at 5%, and suggested savers fix their savings for 1 -2 years at rates of between 6.5% and 7.3% (available at the time). Advice which I followed ! :)

http://www.marketoracle.co.uk/Article6675.html

NOTHING to be embarrassed about being out on year end rates by 1% based on aforecast made a YEAR earlier.

The point is this I analyse the markets with a view to monetizing on trends by putting my own money on the line on the basis of my analysis, so it has to be accurate or I WILL lose money.

Which is why I caught the stock market bottom in March and concluded unequivably (none of this bear market rally BS) that we were in a STEALTH bull market that I expected would run for many years.

So I invested, and profited, now if that bull market had not transpired then being embarrased would far easier to deal with than the hole in my portfolio.

I expect interest rates to rise, 1.5% to 2% by end of this year, and 3% by mid 2011.

Watch and learn ;)


DH
23 Mar 10, 10:56
Embarrasing ?

As far as the stock market, congratulations but I don’t think I even mentioned that??

On rates I was referring to the fact that you thought rates would rise to 1.5% by the end of 2009. As far as this year’s forecast, there is no way the BoE will raise rates this year at all, let alone to your forecast of 2%. Watch and learn


Nadeem_Walayat
23 Mar 10, 12:20
Interest rates

The reason interest rates did not rise is because since March 2009 we have had no market, the rates are being kept artificially lower as a consquence of QE and other mechanisms.

UK inflation bottomed in mid 2009 as expected and had trended higher into the end of 2009 as forecast. Interest rates would have followed this trend had they market not been actively manipulated where the Bank of England abandoned its policy of keeping inflation at 2%.

Which is why we have inflation above 3%. If interes rates were at 1.5% then inflation would be at 2%.

I could have done what all other academic economists do that is to change their forecasts every month, but I chose NOT TO as that is basically a worthless excercise when it comes to attempting to monetize on trends.

Everyone can be right if they change their forecasts every month, but you cannot go back and make investments in hindesight.


Christine
24 Mar 10, 07:41
Savings rates

Given your interest rate predictions I am in a quandry what to do with my Cash ISAs...

Current Cash ISA offerings especially for transfering are around the 2.5% mark, you can get fixes for 3-5 years at around 4% and Northern Rock is offering a stepped account to 5.5% if you tie the money up for 5 years.

Does that seem sensible or do you think there will be very large increases in inflation over the 3-5 year period?


Nadeem_Walayat
24 Mar 10, 14:22
Cash ISA

I can only say what i would do.

I wound'nt' fix for 3 to 5 years at 4%, minimum would have to be 6%.

The Northern Rock equates to an AER of 4.5%

Only 18 months ago ISA interest rates were between 6% and 7%, so 5 years is a long time to fix at 4.5%.

IF I was transferring, I would be aiming for a 1 year fix at between 3% and 3.5%.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules