FT Alphaville » Mervyn readies his pen.
The consumer price index approaches 3% so quantiative easing must end, intrest rates must rise and we must enter a depression.
All that when the risk is that on fundamentals deflation remains highly likely because soemtime soon China is going to have to flood the market with unwanted goods.
Have we really learned nothing? Do we really think that inflation is still the only important economic indicator?
I despair.
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Given that VAT went up by 2.5% – which, if it’s passed through fully, should increase the retail price of all VATable goods by about 2.2 percentage points – it seems to me we got off fairly lightly with a 1 percentage point increase in the CPI. As you say, the fundamentals still point to a deflation risk, not an inflation risk. Anybody who thinks QE should stop just because of a tax change is a lunatic.