Best Financial Markets Analysis Article UK Inflation CPI surged higher for March from 3% to 3.4% taking the academic economists that populate the mainstream press by surprise against consensus views of inflation rising to 3.1%.

The Bank of England's forecasts for inflation to fall have yet again been shown to be an abysmal failure when it comes to inflation forecasting and targeting where the mantra of UK inflation being at 2% in 2 years time only having been achieved approx 4% of the time, i.e. there is a 96% probability that inflation in 2 years time will NOT be at 2%.

Meanwhile the real rate for UK inflation as measured by the publically more recognised RPI index rocketed higher to 4.4% from 3.7% and stripping out the effects of manipulated low interest rates as a consequence of Quantitative Easing and other direct interventions such as the funneling of tax payer cash onto bailed out banks balance sheets leaves the RPIX at 4.8% which better reflects actual UK consumer price inflation experience and is inline with my own real inflation tracker that stands at 5.3%

Meanwhile deflationists that populate the mainstream press and academic institutions continue to argue the case for DEFLATION, whilst missing the obvious point that the general prices in the economy are INFLATING and NOT DEFLATING, the argument is similar to those that have persuaded most stock market retail investors to remain scared of investing in one of the greatest stock bull markets in history that bottomed in March 2009.

UK Inflation Forecast 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%). As the below graph shows, the inflation trend to date has been highly accurately mapped out now FOUR months in advance, with inflation for March of 3.4% having been precisely forecast in December 2009.

Labour to Get Election Boost from Strong UK GDP Data on Friday

Labour will shortly be playing its Election Ace which will be an economic growth surprise to the upside on release of UK GDP Data for the 1st quarter of 2010 on 23rd April as per the forecast (31 Dec 2009 - UK Economy GDP Growth Forecast 2010 and 2011, The Stealth Election Boom ) and in depth analysis in the Inflation Mega-Trend Ebook (FREE Download). Which is set against the mainstream press / academic economists continuing debate of a potential double dip recession.

UK Interest Rate

The mainstream view continues for NO change in UK interest rates this year, this is illustrated by Roger Bootle of the Daily Telegraph's repetitive assertions that he expects UK interest rates to stay below 1% for the next 5 years. Meanwhile market interest rates have already risen as the bond markets price in higher inflation and interest rates, with the bond market targeting a year end interest rate of between 4.5% and 5% for UK government bonds which will have severe implications for the financing of Britians huge and growing £1 trillion debt mountain (PSND) with total liabilities extending to more than £3.7 trillion.

My in depth analysis of 13th January (UK Interest Rate Forecast 2010 and 2011 ) concluded with the following forecast, that takes into account that despite the Bank of England wanting to keep interest rates at 0.5%, the market as a consequence of inflation and debt will force the Bank of England to start raising rates -

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%.

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 FREE Inflation Mega-trend ebook , 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.

Source: http://www.marketoracle.co.uk/Article18789.html

By Nadeem Walayat

http://www.marketoracle.co.uk

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

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

The Market Oracle is a FREE Financial Markets Forecasting & Analysis web-site.
(c) 2005-2024 MarketOracle.co.uk (Market Oracle Ltd) - Market Oracle Ltd asserts copyright on all articles authored by our editorial team and all comments posted. Any and all information provided within the web-site, is for general information purposes only and Market Oracle Ltd do not warrant the accuracy, timeliness or suitability of any information provided on this site. nor is or shall be deemed to constitute, financial or any other advice or recommendation by us. and are also not meant to be investment advice or solicitation or recommendation to establish market positions. We do not give investment advice and our comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to enter into a market position either stock, option, futures contract, bonds, commodity or any other financial instrument at any time. We recommend that independent professional advice is obtained before you make any investment or trading decisions. By using this site you agree to this sites Terms of Use. From time to time we promote or endorse certain products / services that we believe are worthy of your time and attention. In return for that endorsement and only in the cases where you purchase directly though us may we be compensated by the producers of those products.