Well, the markets seem strangely buoyant this morning which is a little surprising to me given the 9:30am ONS Inflation report which included the nasty surprise of CPI increasing to 3.7% for December!
That now completes the picture for 2010 with CPI having been maintained at more than 3% for the year (incl. just 1 month at 3%). (What is that BoE target again?)
Really interesting to see all the opposing opinions on inflation over the days since the BoE kept rates on hold on Thursday.
The respected Ernst and Young think tank are predicting that CPI will rise to 4% as early as February quoting a frightening compounding spiral of increase upon increase but, strangely, are also suggesting that 4% will be the peak and that the BoE should hold its nerve and not raise interest rates this year!
Well, the forecast might be more realistic than the BoE who were expecting December inflation to rise to 3.3% (from 3%) and that it would peak at 3.5% through this year.
Interesting statement on the thisismoney.co.uk: Inflation at 3.7% article which suggests that "At this level of inflation, £1,000 loses around half its value in 20 years".
So, the clear consensus is that inflation will continue to rise but leaves the question open as to when, and what, inflation will peak at and then (the big IF!), whether the figures will come down of their own accord.
On a final note, when considering the CPI at 3.7% (as opposed to the RPI at 4.7%), just remember that the calculation of CPI doesn't include: Council Tax; mortgage interest payments; buildings insurance and house depreciation (so as long you don't live in a house then...).
There are a few more subtle differences linked to cost v. price as well but if the market for goods and services is competitive then the make up could be deemed the most important element.
thisismoney.co.uk link: Inflation at 3.7%...
thisismoney.co.uk link: December CPI what the analysts say
link to Reuters.com: Sterling hits 8 week high...
thisismoney.co.uk link: Interest rates must not rise experts warn
That now completes the picture for 2010 with CPI having been maintained at more than 3% for the year (incl. just 1 month at 3%). (What is that BoE target again?)
Really interesting to see all the opposing opinions on inflation over the days since the BoE kept rates on hold on Thursday.
The respected Ernst and Young think tank are predicting that CPI will rise to 4% as early as February quoting a frightening compounding spiral of increase upon increase but, strangely, are also suggesting that 4% will be the peak and that the BoE should hold its nerve and not raise interest rates this year!
Well, the forecast might be more realistic than the BoE who were expecting December inflation to rise to 3.3% (from 3%) and that it would peak at 3.5% through this year.
Interesting statement on the thisismoney.co.uk: Inflation at 3.7% article which suggests that "At this level of inflation, £1,000 loses around half its value in 20 years".
So, the clear consensus is that inflation will continue to rise but leaves the question open as to when, and what, inflation will peak at and then (the big IF!), whether the figures will come down of their own accord.
On a final note, when considering the CPI at 3.7% (as opposed to the RPI at 4.7%), just remember that the calculation of CPI doesn't include: Council Tax; mortgage interest payments; buildings insurance and house depreciation (so as long you don't live in a house then...).
There are a few more subtle differences linked to cost v. price as well but if the market for goods and services is competitive then the make up could be deemed the most important element.
thisismoney.co.uk link: Inflation at 3.7%...
thisismoney.co.uk link: December CPI what the analysts say
link to Reuters.com: Sterling hits 8 week high...
thisismoney.co.uk link: Interest rates must not rise experts warn
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