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Bank of England Blames Brexit for Sterling Drop Inflation, Masks QE Money Printing Cause

Economics / Inflation Oct 17, 2016 - 06:34 AM GMT

By: Nadeem_Walayat

Economics

The Bank of England's master monetary magician Mark Carney appeared on stage this week presenting his latest magic trick one of blaming the 16% drop in sterling on Brexit on all those who voted for it, and then warning of the inevitable future inflation consequences as the price of imports look to soar. After all the establishment elite remain determined to subvert the will of the British people be they bankers or 80% of the members of the establishment MP's that illustrates that democracy is to to all intents and purposes an illusion.


Mark Carney warning to expect higher inflation:

"We're willing to tolerate a bit of an overshoot in inflation over the course of the next few years in order to avoid (rising unemployment), to cushion the blow and make sure the economy can adjust as well as possible.

Our job is not to target the exchange rate, our job is to target inflation.

But that doesn't mean we're indifferent to the level of sterling.

It does matter, ultimately, inflation and over the course of two to three years out, so it matters to the conduct of monetary policy."

Yes inflation is going to rise as I forecast it would BEFORE the EU Independence referendum Brexit vote and in the subsequent analysis and this video in my post-brexit series.

04 Jul 2016 - BrExit Implications for UK Economy, Interest Rates, Bonds, Markets, Debt & Deficit, Inflation...

Therefore both of these factors look set to drive UK CPI inflation significantly higher to above CPI 2% and very probably to spike above 3% early 2017, and RPI probably spiking above 4%. However, beyond that unless the surge in inflation triggers significant wage inflation then CPI inflation should then soon start retreat to back below 2% and the trend towards that of the inflation rate of the US at that time a year from now.

So the bottom line is that despite brexit inducing economic weakness, expect UK CPI Inflation to spike towards 3% and RPI to above 4% by early 2017, probably peaking for January 2017 data before trending lower into mid 2017

The most recent inflation release for August 2016 has seen inflation nudge marginally higher to CPI 0.60% and RPI to 1.8%, with Octobers release due on the 18th.

However, this was before the latest plunge in sterling which will probably not show through in the inflation indices for a couple more months.

Leaving aside the flash crash antics of the emerging machine intelligence that I covered in the following video:

The British Pound now having fallen by 16% against the dollar form where it was trading pre-Brexit means that Bank of England has effectively WON the currency War! that ALL central banks have been engaged in for some years, one of competitive devaluations in an attempt to export deflation and import inflation as I stated would happen long before the Brexit outcome.

However, the UK winning the currency WAR is NOT primarily as a consequence of Brexit for the effect of Brexit accounts for no perhaps no more than 1/3rd sterling's drop. For the real the reason for why sterling has fallen we need to turn to the Chief Magician at the Bank of England who in his latest doom laden commentary utterly failed to mention the real cause for the drop in sterling which is the Bank of England first flooding with banks with £130 billion in the immediate aftermath of Brexit and then again printing £70 billion of QE in early August, topping it all off with slashing rates by 50% to 0.25%. That's money printing potential of £200 billion or about 11% of GDP, and THAT is the primary reason why sterling has fallen by so much and NOT Brexit, that perhaps accounts for no more than about 5% of the 16% drop.

If any nation prints money to the tune of 11% of GDP and signals that there could be more to come then that WILL translate into a drop in the currency by 11% or more. Also remember that all central banks are engaged in a war to devalue their currencies so the actual impact is usually less than the headline print run would suggest i.e. probably half but coupled with an interest rate cut to 0.25% and throw brexit uncertainty into the mix then the British economy will feel the the full dose of the injection of monetary heroin, the UK economy is a monetary heroin drug addict, addicted to rampant central bank money printing that CAUSES INFLATION !

The Inflation Mega-Trend Ebook DownloadNOTE THIS ! CENTRAL BANK / GOVERNMENT MONEY PRINTING CAUSES INFLATION !

This is nothing NEW, for I have been literally banging this drum for a decade now hence the exponential INFLATION MEGA-TREND as illustrated by my January 2010 The Inflation |Mega-trend ebook that you can download for free that warned to expect money printing in the form of QE and Government debt (bonds) to inflate ASSET prices such as stocks and housing for many years to come that HAS subsequently come to pass whilst at the time the bulk of the clueless most vocal commentators were warning of debt deleveraging deflation which I warned was a RED HERRING because there would be NO DEBT DELVERAGING!

So here we stand, the Bank of England's chief propagandist once more putting in a good performance for the gullible and clueless journalists to dutifully regurgitate across the mainstream financial media whilst rampant central bank and government money printing (QE & debt) inflationary mega-trend rages on that translates into further loss of purchasing power of earnings and savings whilst asset prices such as stocks and housing inflate.

I have just kick started my latest series of videos on how to profit from the exponential mega-trend, so ensure you are subscribed to my youtube channel and free newsletter for notification of new videos in this series as human intelligence gives way to machine intelligence drivers for the exponential mega-trend.

By Nadeem Walayat

http://www.marketoracle.co.uk

Copyright © 2005-2016 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.

Nadeem Walayat has over 25 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 focuses on UK inflation, economy, interest rates and housing market. He is the author of five ebook's in the The Inflation Mega-Trend and Stocks Stealth Bull Market series that can be downloaded for Free.

Housing Markets Forecast 2014-2018The Stocks Stealth Bull Market 2013 and Beyond EbookThe Stocks Stealth Bull Market Update 2011 EbookThe Interest Rate Mega-Trend EbookThe Inflation Mega-trend Ebook

Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 1000 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.


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