Why isn't the inflation rate falling? Wasn't the UK supposed to be teetering on the edge of deflation?
Take fuel out of the CPI and all other prices are increasing by 3.5 percent. Almost the entire fall in the headline inflation rate is due to the sudden collapse in oil prices when it went from $147 to just $39.
Unfortunately the price of oil is turning nasty again. It has just crossed the $60 mark. Which means that rather than helping bring the headline inflation rate down, the price of oil will start to push it back up again.
Meanwhile, the Bank of England is printing cash, buying up every piece of government debt that comes onto the the market. Over in Westminister, the Government is about to run up the largest fiscal deficit in peace time. The last time we had a larger deficit, prices were kept under control by rationing.
Give this sorry mess 18-24 months, and the UK will look like a 1970s Banana Republic.