Inflation

[Itsallaguess]

‎
Latest UK inflation figures out this morning -

UK inflation rate falls to 8.7% in April -

The UK inflation rate has dropped below 10% for the first time in eight months.

The rate at which prices rose in April compared to a year ago was 8.7%, according to figures just released by the Office for National statistics.

Forecasters had expected a figure closer to 8%.

https://www.bbc.co.uk/news/live/business-65653791




Source - https://www.telegraph.co.uk/business/2023/05/24/ftse-100-markets-live-news-cpi-inflation/

Hopefully we're over the worst...

Cheers,

Itsallaguess

[Nimrod103]

‎

Hopefully we're over the worst...

Cheers,

Itsallaguess

But......
Core inflation, which strips out volatile food and drink prices, rose to 6.8pc in April - its highest level since 1992. (Daily Telegraph).

What does it take for Bailey to do the honourable thing, and resign?

[ADrunkenMarcus]

Food price inflation is particularly concerning and core inflation is a worry, too.

The headline inflation figure is, at least, headed down but prices are merely rising at a slightly lower rate of increase. It highlights the challenge for investors in making a real return on their capital. When I put together the final figures for my dividend growth portfolio, I expect the accumulation unit value to have increased about 7.5% as against 8.7% inflation. I'm pleased that I have largely been able to maintain the real value of my capital, but it has not matched inflation for the previous year and so there has been a slight loss.

Best wishes


Mark.

[Tedx]

Container prices have fallen sharply as the pandemic snarp ups continue to ease.



Energy prices have fallen sharply since the dramtic spikes of last year.

https://tradingeconomics.com/commodity/uk-natural-gas

...yet food prices remain high. Some of that was due to weather and energy prices in Europe.

Sunak has had a 'chat' with the UK's supermarket bosses over supermarket profiteering. A chat won't do it though.

https://www.thegrocer.co.uk/politics/wh ... 65.article

Price controls? Maybe. Or maybe they need more competition.

[Arborbridge]

Container prices have fallen sharply as the pandemic snarp ups continue to ease.



Energy prices have fallen sharply since the dramtic spikes of last year.

https://tradingeconomics.com/commodity/uk-natural-gas

...yet food prices remain high. Some of that was due to weather and energy prices in Europe.

Sunak has had a 'chat' with the UK's supermarket bosses over supermarket profiteering. A chat won't do it though.

https://www.thegrocer.co.uk/politics/wh ... 65.article

Price controls? Maybe. Or maybe they need more competition.

Profiteering? I'm not sure what the latest margins are, but they have always been incredibly small - which is one good reason some people here advocate never investing in supermarkets. Low margins also indicate high competition. Given that, there isn't room for much profiteering over the long term - only perhaps some rebuilding of margins temporarily.

Arb.

[Arborbridge]

Britain’s Inflation Rate May Fall at Sharpest Pace in 30 Years


Well, we shall see. In recent we have built quite a reputation for being number one in the inflation game. We dont want to give that up. Plus we are grand masters at kicking our own backsides, so a lot can go wrong. And even if it does come in lower than expected, Baily has a fetish for squeezing the balls of normal folk whilst making sure his crowd are just fine. So he'll find 'something in the data to allow him to stick another 1/2 % on rates (for cash balances over £300k only)

Anyway, 8 2 to 8.4% is what's expected. Mainly due to 'base effects' (I.e. wholesale energy futures falling 90% from their peak. Raising interest rates did that you know.

Anything less than that and Bailys bond mates will be loading up at 4% and cracking open the champagne.

https://uk.news.yahoo.com/britain-infla ... 00934.html

Unfortunately, it is the spending habit of the millions - what you call "normal" folk - which largely helps to drive inflation. If one has to squeeze something, it is our ability to go out and spend when supply cannot keep pace. Raising interest rates does that by making the millions think twice about whether they can chase those prices further, or whether they need to rein back. Anecdotally, I've read about people shelving plans for buying cars or houses due to interest rate rises - this demonstrates exactly how the mechanism works - but it only works if millions of people are involved, and that means the vast middle ground of ordinary folk.
It's nothing to do with Baileys "mates" - just hard economics. Following any change, naturally, there will be a sub set who benefit while others suffer, That would be true whatever the BOE did next.

Incidentally, I notice that there are now fewer billionaires in the UK than previously, and that their real income has declined too, according to the Times. (I also note tangentially, that though some people have recently been going on about the King's wealth, that he didn't even feature in the top 250 Times rich list).

Arb.

[Nimrod103]

Container prices have fallen sharply as the pandemic snarp ups continue to ease.



Energy prices have fallen sharply since the dramtic spikes of last year.

https://tradingeconomics.com/commodity/uk-natural-gas

...yet food prices remain high. Some of that was due to weather and energy prices in Europe.

Sunak has had a 'chat' with the UK's supermarket bosses over supermarket profiteering. A chat won't do it though.

https://www.thegrocer.co.uk/politics/wh ... 65.article

Price controls? Maybe. Or maybe they need more competition.

Profiteering? I'm not sure what the latest margins are, but they have always been incredibly small - which is one good reason some people here advocate never investing in supermarkets. Low margins also indicate high competition. Given that, there isn't room for much profiteering over the long term - only perhaps some rebuilding of margins temporarily.

Arb.

Agreed. The supermarkets are being given a ritual kicking, but their share prices hardly show profiteering.

“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

When will Bailey finally admit his culpability?

[ADrunkenMarcus]

Bruce Stout was right.

Best wishes


Mark.

[dealtn]

Price controls? Maybe. Or maybe they need more competition.

Supermarkets are one the most competitive sectors in the economy.

[Arborbridge]

“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

When will Bailey finally admit his culpability?

Culpability, how?

Is it not always a value judgement balancing the need to reduce inflation versus the "speed" of the economy.
What would you have done? - answers not including hindsight

Arb.

[Arborbridge]

Bruce Stout was right.

Best wishes


Mark.

I missed hat bit of folklore - what did he say?

[Nimrod103]

“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.”

When will Bailey finally admit his culpability?

Culpability, how?

Is it not always a value judgement balancing the need to reduce inflation versus the "speed" of the economy.
What would you have done? - answers not including hindsight

Arb.

Culpable? Can there really be any doubt? Prices were rising steeply before the Ukraine war because QE had gone on far longer than required. In retrospect I doubt whether 13 years of the lowest interest rates EVER was a good idea. His only target is 2% inflation and he has missed by a mile. He should have acted much sooner to raise interest rates. Years ago even.

But you don't want to talk about history, which is the only thing Bailey knows anything about, seeing as he has no training in economics, and from his track record has not learned any since leaving uni.

[scrumpyjack]

..
But you don't want to talk about history, which is the only thing Bailey knows anything about, seeing as he has no training in economics, and from his track record has not learned any since leaving uni.

Yes Bailey is a disaster and really out of his depth. From the look of him he spends far too much time having large business lunches

Guys like him and Howard Davies are prime examples of the Peter principle

[XFool]

Prices were rising steeply before the Ukraine war because QE had gone on far longer than required.

But was that not because of the effects of the global economy starting up again after the pandemic? From memory, the explanation given at the time.
Had not QE had been going on long before both the Ukraine war and before the pandemic?

[Arborbridge]

Culpability, how?

Is it not always a value judgement balancing the need to reduce inflation versus the "speed" of the economy.
What would you have done? - answers not including hindsight

Arb.

Culpable? Can there really be any doubt? Prices were rising steeply before the Ukraine war because QE had gone on far longer than required. In retrospect I doubt whether 13 years of the lowest interest rates EVER was a good idea. His only target is 2% inflation and he has missed by a mile. He should have acted much sooner to raise interest rates. Years ago even.

But you don't want to talk about history, which is the only thing Bailey knows anything about, seeing as he has no training in economics, and from his track record has not learned any since leaving uni.

I guess would have got it spot on if you had been making the decisons.

Ever heard of "those who can do, those who can't criticise?"

[Arborbridge]

Prices were rising steeply before the Ukraine war because QE had gone on far longer than required.

But was that not because of the effects of the global economy starting up again after the pandemic? From memory, the explanation given at the time.
Had not QE had been going on long before both the Ukraine war and before the pandemic?

Inflation due to QE was long foretold. Unfortunately, the economy did not pick up as fast as anyone hoped (us being the sick man of Europre, etc) so those in power did not want to raise interest rates too soon.

An impossible balancing act and I doubt if anyone would have got it perfectly right. Of course the Guv'n'r is not wholly to blame (if blame is the right word) because the decisions are made by the MPC after advice, data and forecasts from others, no doubt. To hang it all on one person as some here do is frankly absurd.

If Bailey had any choice it would have been to stay in the EU - as we all know, that would have made the situation far better at a stroke.

Arb.

[Nimrod103]

Culpable? Can there really be any doubt? Prices were rising steeply before the Ukraine war because QE had gone on far longer than required. In retrospect I doubt whether 13 years of the lowest interest rates EVER was a good idea. His only target is 2% inflation and he has missed by a mile. He should have acted much sooner to raise interest rates. Years ago even.

But you don't want to talk about history, which is the only thing Bailey knows anything about, seeing as he has no training in economics, and from his track record has not learned any since leaving uni.

I guess would have got it spot on if you had been making the decisons.

Ever heard of "those who can do, those who can't criticise?"

Andrew Bailey is paid nearly £600,000/year to get his decisions right. He has failed in his decisions, so why should he be paid? If somebody in private industry had such an abysmal record, would he still be employed?

[Nimrod103]

But was that not because of the effects of the global economy starting up again after the pandemic? From memory, the explanation given at the time.
Had not QE had been going on long before both the Ukraine war and before the pandemic?

Inflation due to QE was long foretold. Unfortunately, the economy did not pick up as fast as anyone hoped (us being the sick man of Europre, etc) so those in power did not want to raise interest rates too soon.

An impossible balancing act and I doubt if anyone would have got it perfectly right. Of course the Guv'n'r is not wholly to blame (if blame is the right word) because the decisions are made by the MPC after advice, data and forecasts from others, no doubt. To hang it all on one person as some here do is frankly absurd.

If Bailey had any choice it would have been to stay in the EU - as we all know, that would have made the situation far better at a stroke.

Arb.

So you regard our high inflation as being caused by Brexit? I guess you think the high inflation in the USA is also caused by Brexit too? Except the Fed is independent and staffed by people who are keenly aware of what needs to be done.

It is quite clear that the models which the BoE are using (and which no doubt historian Andrew Bailey has no understanding of) are wrong, and have to be revised. Bailey has now admitted as much (https://www.ft.com/content/b972f5e3-4f0 ... 43878424ac, Governor Andrew Bailey admits central bank no longer following its own model when predicting price rises). Anyone with half a brain could have seen that pumping so much money into the Covid finacial giveaway, would exacerbate inflation. One only had to look at how much house prices rose during 2021-22.

[1nvest]

But was that not because of the effects of the global economy starting up again after the pandemic? From memory, the explanation given at the time.
Had not QE had been going on long before both the Ukraine war and before the pandemic?

Inflation due to QE was long foretold. Unfortunately, the economy did not pick up as fast as anyone hoped (us being the sick man of Europre, etc) so those in power did not want to raise interest rates too soon.

An impossible balancing act and I doubt if anyone would have got it perfectly right. Of course the Guv'n'r is not wholly to blame (if blame is the right word) because the decisions are made by the MPC after advice, data and forecasts from others, no doubt. To hang it all on one person as some here do is frankly absurd.

If Bailey had any choice it would have been to stay in the EU - as we all know, that would have made the situation far better at a stroke.

Arb.

2007 pre financial crisis and UK debt stood at around £500Bn, costing around 5% to service.
Then along came the financial crisis and the BoE pretty much printed/bought up all of that debt, returning all of the interest it receives from those gilts back to the treasury a.k.a pretty much the old debt torn up, whilst the treasury issued around 1Tn of new Gilts, priced to half the yield (2.5%) so still the same cost to service. Factor in inflation since 2007 and a UK debt of 2.3Tn type figure relative to the actual debt. Factor in the 500Bn BoE held older Gilts that inflation has eroded down to around 300Bn and the UK debt as-is is sound/reasonable, far better managed than other EU member states.

The main issue is that of forward time. The new cheaper debt is spanned out over many years (50+) and as each of those matures each year the UK will have to decide whether to roll those, potentially into higher cost to service rates, or pay them down (not roll). Inflation again however will work in the Treasury's favour.

The UK finances are OK, not good, but better than many others. The predominant issue is that Remainers are still vandalising the economy at every opportunity, looking to down-talk/down-run the UK constantly which is reflecting into actuals. So far they've managed to oust most of the Brexiteers out of governance etc. Things could have been massively better however as one example every mandated/manifesto pledge have pretty much been broken/failed ... by design. The drive appears to be to accept Labour rising into government as one means for the UK to be re-bound by the EU. Sunak's ditching of the DUP was a large step in that direction. If/when that comes to fruition the UK will have relatively declined both due to the initial cost of Brexit and as a consequence of rejoining again (rather than seeing the cost of having left subsequently being recouped and more).

[squareofthewicket]

Culpable? Can there really be any doubt? Prices were rising steeply before the Ukraine war because QE had gone on far longer than required.

Agreed that QE had gone on far longer than required and the interest rates were kept low for far too longer than required. I won't comment on Bailey's competence as I haven't the sufficient knowledge in economics to do so. But the currebt situation cannot be totally blamed on Bailey as he only became the chair of the BoE in March 2020 days before the world went into Covid lockdowns. If anyone is to blame it is his predecessor and his committee members who more or less made the situation what it is today in terms of high inflation by keeping interest rates far too low for too long.