Tuesday, 14 July 2009

Inflation up again

Yes, I know. Everyone else is reporting that inflation went down in June to 1.8 percent. However, it always helps to look at the monthly change in prices.

In June, the monthly inflation rate was 0.24 percent. If we have twelve months of that kind of monthly increases, then the annual inflation rate will be 3 percent. However, we have had five months of surprisingly robust price increases. Since January, prices are already up 2 percent.

The headline rate is likely to go down in the coming months. This is due to the four months of declining prices that immediately followed the Lehman collapse. With QE in full swing, prices are again creeping upwards. The recent monthly increases will start to feed into some potentially alarming increases towards the end of the year.

So, if the current monthy rate continues for the next few months, we can expect inflation to come down to about 1.3 percent in September. It is likely to rise thereafter.


Seema said...

A story totally missing elsewhere. Thank you Alice.

boiling frog said...

I am confused, inflation in the Eurozone is down because of cheaper petrol, inflation in the US is up because of more expensive petrol.
Here in the UK the gubment will go on queasing and allowing the GBP to sink, a recipe for inflation.