Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Best Stocks for Investing to Profit form the Metaverse and Get Rich - 29th Nov 21
Should You Invest In Real Estate In 2021? - 29th Nov 21
Silver Long-term Trend Analysis - 28th Nov 21
Silver Mining Stocks Fundamentals - 28th Nov 21
Crude Oil Didn’t Like Thanksgiving Turkey This Year - 28th Nov 21
Sheffield First Snow Winter 2021 - Snowballs and Snowmen Fun - 28th Nov 21
Stock Market Investing LESSON - Buying Value - 27th Nov 21
Corsair MP600 NVME M.2 SSD 66% Performance Loss After 6 Months of Use - Benchmark Tests - 27th Nov 21
Stock Maket Trading Lesson - How to REALLY Trade Markets - 26th Nov 21
SILVER Price Trend Analysis - 26th Nov 21
Federal Reserve Asks Americans to Eat Soy “Meat” for Thanksgiving - 26th Nov 21
Is the S&P 500 Topping or Just Consolidating? - 26th Nov 21
Is a Bigger Drop in Gold Price Just Around the Corner? - 26th Nov 21
Financial Stocks ETF Sector XLF Pullback Sets Up A New $43.60 Upside Target - 26th Nov 21
A Couple of Things to Think About Before Buying Shares - 25th Nov 21
UK Best Fixed Rate Tariff Deal is to NOT FIX Gas and Electric Energy Tariffs During Winter 2021-22 - 25th Nov 21
Stock Market Begins it's Year End Seasonal Santa Rally - 24th Nov 21
How Silver Can Conquer $50+ in 2022 - 24th Nov 21
Stock Market Betting on Hawkish Fed - 24th Nov 21
Stock Market Elliott Wave Trend Forecast - 24th Nov 21
Your once-a-year All-Access Financial Markets Analysis Pass - 24th Nov 21
Did Zillow’s $300 million flop prove me wrong? - 24th Nov 21
Now Malaysian Drivers Renew Their Kurnia Car Insurance Online With Fincrew.my - 24th Nov 21
Gold / Silver Ratio - 23rd Nov 21
Stock Market Sentiment Speaks: Can We Get To 5500SPX In 2022? But 4440SPX Comes First - 23rd Nov 21
A Month-to-month breakdown of how Much Money Individuals are Spending on Stocks - 23rd Nov 21
S&P 500: Rallying Tech Stocks vs. Plummeting Oil Stocks - 23rd Nov 21
Like the Latest Bond Flick, the US Dollar Has No Time to Die - 23rd Nov 21
Why BITCOIN NEW ALL TIME HIGH Changes EVERYTHING! - 22nd Nov 21
Cannabis ETF MJ Basing & Volatility Patterns - 22nd Nov 21
The Most Important Lesson Learned from this COVID Pandemic - 22nd Nov 21
Dow Stock Market Trend Analysis - 22nd Nov 21
UK Covid-19 Booster Jabs Moderna, Pfizer Are They Worth the Risk of Side effects, Illness? - 22nd Nov 21
US Dollar vs Yields vs Stock Market Trends - 20th Nov 21
Inflation Risk: Milton Friedman Would Buy Gold Right Now - 20th Nov 21
How to Determine if It’s Time for You to Outsource Your Packaging Requirements to a Contract Packer - 20th Nov 21
2 easy ways to play Facebook’s Metaverse Spending Spree - 20th Nov 21
Stock Market Margin Debt WARNING! - 19th Nov 21
Gold Mid-Tier Stocks Q3’21 Fundamentals - 19th Nov 21
Protect Your Wealth From PERMANENT Transitory Inflation - 19th Nov 21
Investors Expect High Inflation. Golden Inquisition Ahead? - 19th Nov 21
Will the Senate Confirm a Marxist to Oversee the U.S. Currency System? - 19th Nov 21
When Even Stock Market Bears Act Bullishly (What It May Mean) - 19th Nov 21
Chinese People do NOT Eat Dogs Newspeak - 18th Nov 21
CHINOBLE! Evergrande Reality Exposes China Fiction! - 18th Nov 21
Kondratieff Full-Season Stock Market Sector Rotation - 18th Nov 21
What Stock Market Trends Will Drive Through To 2022? - 18th Nov 21
How to Jump Start Your Motherboard Without a Power Button With Just a Screwdriver - 18th Nov 21
Bitcoin & Ethereum 2021 Trend - 18th Nov 21
FREE TRADE How to Get 2 FREE SHARES Fractional Investing Platform and ISA Specs - 18th Nov 21
Inflation Ain’t Transitory – But the Fed’s Credibility Is - 18th Nov 21
The real reason Facebook just went “all in” on the metaverse - 18th Nov 21
Biden Signs a Bill to Revive Infrastructure… and Gold! - 18th Nov 21
Silver vs US Dollar - 17th Nov 21
Silver Supply and Demand Balance - 17th Nov 21
Sentiment Speaks: This Stock Market Makes Absolutely No Sense - 17th Nov 21
Biden Spending to Build Back Stagflation - 17th Nov 21
Meshing Cryptocurrency Wealth Generation With Global Fiat Money Demise - 17th Nov 21
Dow Stock Market Trend Forecast Into Mid 2022 - 16th Nov 21
Stock Market Minor Cycle Correcting - 16th Nov 21
The INFLATION MEGA-TREND - Ripples of Deflation on an Ocean of Inflation! - 16th Nov 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

UK CPI Inflation Explodes Higher to 5.2%

Economics / Inflation Oct 14, 2008 - 04:41 PM GMT

By: Nadeem_Walayat

Economics Best Financial Markets Analysis ArticleThe inflationary spike higher continued on release of September's inflation data which saw the CPI measure burst through 5% to hit 5.2% from 4.7% the month before. CPI crossed above the RPI inflation measure for the first time in 7 years which now stands at 5%, as the below graph illustrates.


However inflation data is lagging the real economy by between 5 and 8 months and does not yet reflect the sharp slowdown of the UK economy over the last 3 months, nor is the impact of the fall in oil prices from $147 to $80 over the last 2-3 months. Therefore this implies inflation data will start to become muted in the coming months in advance of a similarly sharp drop on par with the spike higher. On a further negative for the government September RPI data is used for indexation of pensions and benefits which is likely to cost an additional of as much as £5 billion, as well as igniting public sector demands for higher pay deals despite the onset of recession.

However as I pointed out in the UK interest rate forecast for 2009 that cuts in interest rates and bailouts will result higher inflation further out and therefore puts sterling at a risk of foreign investors starting to view the UK as a big version of Iceland. I first wrote that the Bank of England would be forced by the government to abandon inflation targeting and cut interest rates no matter how high inflation rose as long ago as in May of this year UK House Prices Tumbling- Interest Rate Conundrum. The interest rate forecast continues to imply deep cuts regardless of the rate of inflation, having been confirmed by last Thursday's panic 0.5% co-ordinated cut by the BoE, US Fed and ECB.

UK interest Rate Forecast for 2009

The Bank of England continues to forecast that UK CPI inflation will be at 2% in 2 years time, which is precisely the same perpetual forecast that the Bank of England has been making since it was assigned the 2% inflation target some 5 years ago, during which time the Bank of England has only hit its target for 5 months or 8% of the time, just as the Bank of England 2 years ago was forecasting that UK inflation would be at 2% for September 2008 when it is clearly far from 2%.

Some in-experienced mainstream television commentators are mistakenly stating that prices will fall in the near future. That is incorrect the rate of overall prices rises will reduce, but we are not heading for falling prices as both the currency factor and the huge explosion in government borrowing due to the extra debt burden of £500 billion banking system bailout would cost the tax payer approx £25 billion a year in extra interest which effectively nearly doubles the countries official government debt of £590 billion which tends to exclude in what can be termed as creative accounting other public sector debt, such as un-funded public sector pension liabilities of more than £800 billion with other hidden debt totaling £100 billion would put real UK public debt at some £2 trillion or some 160% of annual GDP which is far above the governments official limit of 40% of GDP. However economic contraction will shrink UK GDP and hence the gap between spending and income will be again be filled by more debt. Therefore we could see public debt rise to as much as 100% of GDP and if the hidden debt is included, a rise to 200% of GDP. This is highly inflationary and is the primary reason for the relative weakness of sterling, as real returns turn further negative (inflation minus base rate = -0.70%).

My UK CPI inflation forecast covering the anticipated trend for the next 12 months will be published within the next 2 weeks, in advance of the UK Housing market forecast for the next few years as an update to the existing forecast as of August 2007.

Remember to subscribe to our FREE weekly newsletter for the Stock Market Crash Investment Strategies as well as the Real Secrets of Successful Trading on the 21st anniversary of 1987, that are to be emailed later this week.

By Nadeem Walayat
http://www.marketoracle.co.uk

Copyright © 2005-08 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 is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 150 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