Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Corona Virus Wuhan Global Pandemic 2020 Deaths Forecast and Market Consequences - 28th Jan 20
Palladium Surges above $2,400. Is It Sustainable? - 27th Jan 20
THIS ONE THING Will Tell Us When the Bubble Economy Is Bursting… - 27th Jan 20
Stock Market, Gold Black Swan Event Begins - 27th Jan 20
This Will Signal A Massive Gold Stocks Rally - 27th Jan 20
US Presidential Cycle Stock Market Trend Forecast 2020 - 27th Jan 20
Stock Market Correction Review - 26th Jan 20
The Wuhan Wipeout – Could It Happen? - 26th Jan 20
JOHNSON & JOHNSON (JNJ) Big Pharama AI Mega-trend Investing 2020 - 25th Jan 20
Experts See Opportunity in Ratios of Gold to Silver and Platinum - 25th Jan 20
Gold/Silver Ratio, SPX, Yield Curve and a Story to Tell - 25th Jan 20
Germany Starts War on Gold  - 25th Jan 20
Gold Mining Stocks Valuations - 25th Jan 20
Three Upside and One Downside Risk for Gold - 25th Jan 20
A Lesson About Gold – How Bullish Can It Be? - 24th Jan 20
Stock Market January 2018 Repeats in 2020 – Yikes! - 24th Jan 20
Gold Report from the Two Besieged Cities - 24th Jan 20
Stock Market Elliott Waves Trend Forecast 2020 - Video - 24th Jan 20
AMD Multi-cores vs INTEL Turbo Cores - Best Gaming CPUs 2020 - 3900x, 3950x, 9900K, or 9900KS - 24th Jan 20
Choosing the Best Garage Floor Containment Mats - 23rd Jan 20
Understanding the Benefits of Cannabis Tea - 23rd Jan 20
The Next Catalyst for Gold - 23rd Jan 20
5 Cyber-security considerations for 2020 - 23rd Jan 20
Car insurance: what the latest modifications could mean for your premiums - 23rd Jan 20
Junior Gold Mining Stocks Setting Up For Another Rally - 22nd Jan 20
Debt the Only 'Bubble' That Counts, Buy Gold and Silver! - 22nd Jan 20
AMAZON (AMZN) - Primary AI Tech Stock Investing 2020 and Beyond - Video - 21st Jan 20
What Do Fresh U.S. Economic Reports Imply for Gold? - 21st Jan 20
Corporate Earnings Setup Rally To Stock Market Peak - 21st Jan 20
Gold Price Trend Forecast 2020 - Part1 - 21st Jan 20
How to Write a Good Finance College Essay  - 21st Jan 20
Risks to Global Economy is Balanced: Stock Market upside limited short term - 20th Jan 20
How Digital Technology is Changing the Sports Betting Industry - 20th Jan 20
Is CEOs Reputation Management Essential? All You Must Know - 20th Jan 20
APPLE (AAPL) AI Tech Stocks Investing 2020 - 20th Jan 20
FOMO or FOPA or Au? - 20th Jan 20
Stock Market SP500 Kitchin Cycle Review - 20th Jan 20
Why Intel i7-4790k Devils Canyon CPU is STILL GOOD in 2020! - 20th Jan 20

Market Oracle FREE Newsletter

Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

UK Inflation CPI 3.1%, RPI 4.8% for July, Bank of England Forecast Was for CPI 1.7%

Economics / Inflation Aug 17, 2010 - 12:26 PM GMT

By: Nadeem_Walayat

Economics

Best Financial Markets Analysis ArticleUK inflation for July 2010 dipped marginally from CPI 3.2% to 3.1%, remaining stubbornly above the Bank of England's upper limit of 3% and target of 2%, despite virtually 8 months of mantra from the Governor, Mervyn King that high inflation was just temporary and imminently expected to fall to below the 2% target. The more recognised RPI measure fell from 5% to 4.8% and which compares against average pay rises of 2% which illustrates the squeeze that ordinary people are on especially as taxes rise and state services are cut. The BoE governor wrote yet another full of excuses letter to the Chancellor, George Osbourne as to why the Bank of England is failing in its primary objective of controlling inflation.


The Governor after 8 months of statements that UK Inflation would imminently fall (CPI forecast to have fallen to 1.7% by July 2010) now states that he is surprised by the high level of UK inflation and now expects inflation to remain above the 2% target into the end of 2011 before falling to below 2%. In actual fact Mervyn King and the Bank of England are not making inflation forecasts, but rather pumping out always imminently low inflation propaganda so as to prevent a wage price spiral from taking hold in which respect they have succeeded given the 2.8% gap between RPI inflation and wage rises. Therefore all of the Banks statements and reports are for the sole purpose of TALKING INFLATION lower, for if the Bank of England had been more truthful on inflation expectations at the beginning of 2010 then that would have prompted workers to demand wages more inline with RPI of 4.8% and thus triggering higher inflation and thus making the Banks job more difficult.

Mervyn King deployed another tactic in his letter to Alistair Darling which is to state that he and the BoE are surprised by the strength in inflation, because it is better for the BoE to be surprised by high inflation than to have forecast high inflation coming and then to have failed to have done anything to prevent high inflation from materialising.

At the end of the day inflation is a stealth tax that is being used by the Government and the Bank of England to a. Reduce the budget deficit (eroding purchasing power), and b. funneling tax payers and savers cash onto the balance sheets of the bailed out banks as savers are in receipt of interest net of tax at half the CPI rate and similarly average workers pay rise is near half the CPI and far below the RPI inflation measure of 4.8%.

The Bank of England and the mainstream press always focus on rear view mirror excuses as to why inflation is high such as the rise in food prices, however the point is that there ALWAYS is an excuse because if it was not one thing it would be another, just as in the coming months different excuses will be put forward to explain why UK inflation remains stubbornly high. However looking in the rear view mirror is a worthless exercise when it comes to savers trying to protect their wealth, as for instance the NS&I Index Linked Savings Certificates were withdrawn by the Coalition Government in June ahead of the BoE changing its mantra from highly temporary high inflation. The certificates amounted to a 100% safe inflation hedge that pay an effective tax free interest rate of 6% against the bailed out bankrupt banks that pay less than 2% taxable interest and that everyday continue to cut the rates. Similarly wage earnings have been duped by the Government and the BoE to agree to pittance pay rises of less than 2% or even pay freezes whilst their actual personal inflation measure soars well above the official measures of CPI and RPI.

UK Inflation Forecast 2010

UK Inflation of CPI at 3.1% for July 2010 is in line with my trend forecast for 2010 as of December 2009 that projected CPI above 3% inflation for most of 2010. 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%) and the Inflation Mega-trend Ebook of January 2010 (FREE DOWNLOAD) as illustrated by the below graph.

UK Inflation July 2010

Bank of England's Worthless Inflation Forecasts

According to the Bank of England's forecast for UK inflation as of Feb 2010, CPI inflation by July should have fallen to about 1.7%, instead it is at 3.1% (see graph), with the forecast for inflation to fall to below 1% by the end of 2010 and magically always converge towards 2% in 2 years time which fails to occur 96% of the time.

The Bank of England relies on the gold fish memory of the mainstream press as the BoE seeks to revise inflation forecasts every quarter to push forward 2% to two years forward, which is nearly always preceded by a trend to below 2% 1 year forward. But as mentioned above the quarterly inflation reports are just propaganda aimed at talking the economy and inflation in the direction where the BoE wants it to be as the alternative would be to make their jobs harder.

More here - The Real Reason for Bank of England's Worthless CPI Inflation Forecasts

The big question is when will UK interest rates rise in the face of persistently high inflation which my next in depth analysis will seek to answer, ensure you are subscribed to my ALWAYS FREE Newsletter to receive this in your email in box.

Comments and Source: http://www.marketoracle.co.uk/Article21973.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

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

6 Critical Money Making Rules