Tuesday, 15 July 2008

June inflation - 3.8 percent

I need to find another word to describe inflation. I've been using "surge" a little too often. However, that is exactly what the CPI rate did in June. It jumped from 3.3 percent in May to 3.8 percent in June.

Going forward, a 4 percent rate by the end of the summer is a certainty. How about 5 percent by Christmas?

As for the 2 percent inflation target, that looks like a total joke. With the exception of two short periods, the Bank of England failed to meet it since the middle of 2005.

Any chance of a sensible rate hike from the MPC? Thought not.

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10 comments:

Anonymous said...

the horror!!!!

Markbaldy said...

Alice I would like to know how these jokers actually calculate their inflation figures...because I see massive hikes in the prices of essentials, like food, fuel, gas, electic, etc.. going up a heck of a lot more than 3.8% - I say the true inflation figure is nearer 10% to 15% ?
Perhaps a graph showing inflation for essentials would be nice to see - one that does not include shirts from India or other items this corrupt government would include to drive the figure down... to justify insulting pay rises and keeping interest rates low to prolong Gordon Brown's miracle (bullshit) economy that little bit longer !

aSteve said...

Markbaldy, CPI is calculated in a remarkably transparent way by the ONS... and, if you're further interested (as I was last year) Eurostat publish lots about the basis for the metric - and were even helpful in promptly answering a query I emailed. CPI is not opaque - though the media (and public) are usually grossly ignorant about what it represents - hence mass confusion.

Anyhow... Alternatives to "surge"

A comedy in inflation?

or...

A inflationary fulmination.

The latter has a nice quirky tone... I'd chose that one.

Josh said...

Inflation is running closer to ten percent.

aSteve said...

Josh! Aaaaah!

Why do people say such stupid things?

Until you qualify what you mean by inflation, any percentage figure can be established. CPI is a concrete metric... used correctly is is, by definition, "right" - and it is one definition of "inflation". Sure, it isn't a particularly useful measure in absolute terms as most people go about their daily lives - but that is entirely different from the idea that it is somehow "wrong".

jdc said...

In fairness to Josh, CPI for the last quarter is running at an annualised rate of 8.3%, so RPI is probably around 10.

aSteve said...

JDC, not by their standard definitions they are not.

I understand what you mean, but unless you are explicit about what you are measuring and how - figures such as those are more likely to confuse the issue than clarify.

The key problem is the fallacy that there is one measure for inflation. This fallacy is what was wrong with the BoE's mandate since it gained independence a year ago. This fallacy is confusing the hell out of ordinary folk who assume that the prices of everything go up or down in roughly the price ratios they have today. This is a huge error of judgement.

jdc said...

I promise you that by their standard definitions they are. CPI has averaged just under 0.7% per month for the last three months. Try 1.007 to the power of twelve, and there's your annualised figure for the last quarter.

The headline number is lower because last year's low inflation is still in the annual numbers. Admittedly my annualisation will turn out to be an exaggeration because there's usually a negative number in January (sales), but we could easily see 6%.

aSteve said...

JDC, my point is that headline CPI inflation is "annualised" - the fact that you don't think the method used is appropriate (and that's a strong argument) is relevant.

CPI is not wrong, it is inappropriate in almost every context where it is applied.

aSteve said...

Correction... isn't relevant.

Doah!