Energy firm Npower have definitely got into the post-Christmas inflationary mood. It has jacked that electricity prices for its domestic customers by a shocking 12.7 percent. Meanwhile gas bills will see a 17.2% increase.The announcement from Npower is just the latest evidence of a growing inflationary surge in the UK. Private sector wages are growing at over 4 percent; food prices are up almost 5 percent; and oil prices are at around $100 a barrel.
Despite this surge in prices, the Bank of England are thinking of loosening monetary policy. As far as the Bank of England is concerned, there is only one price that matters - the price of property. That particular price is going the other way, and the Bank is not happy. But fear not; it has the antidote - it is preparing a series of drastic cuts in interest rates. So inflation can go where it likes, the Bank of England must save the housing market.
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Alice is not just a lone voice in the wilderness. Interested parties: please click on the link below to read one of the most incisive, prescient, and accurate blogs on the U.S. and world economy:
http://globaleconomicanalysis.blogspot.com/2008/01/unemployment-soars-as-private-sector.html
(The above link is to the latest post on the blog; I am only a reader of the same.)
All the best in 2008,
Casp
To be fair to the BoE it knows that a collapse in house prices will cause recession and unemployment and deflationary pressures. To my mind it has a very difficult balancing act to follow, but the key thing is that broadly sustainable house prices, slowly rising, are a good thing, and that allowing a large fall in house prices is the only way of achiving that without waiting a decade for wages to catch up.
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