As the Office for National Statistics reported at 7.00 this morning:
- The Consumer Prices Index (CPI) rose by 3.4% in the 12 months to February 2024, down from 4.0% in January.
- On a monthly basis, CPI rose by 0.6% in February 2024, compared with a rise of 1.1% in February 2023.
- The largest downward contributions to the monthly change in CPI came from food, and restaurants and cafes, while the largest upward contributions came from housing and household services, and motor fuels.
- Core CPI (excluding energy, food, alcohol and tobacco) rose by 4.5% in the 12 months to February 2024, down from 5.1% in January; the CPI goods annual rate slowed from 1.8% to 1.1%, while the CPI services annual rate eased from 6.5% to 6.1%.
In other words, as I always said would happen, inflation continues to fall quite rapidly. That was inevitable: the way in which inflation is measured guaranteed it. Now, once wages have caught up this inflationary episode will be over, having passed quite quickly, as almost all such periods in the UK have always done without requiring intervention from anyone to make that happen.
There is, however, one consequence of this inflation that does remain, and that is high interest rates.
Inflation never required interest rates to be increased. Their increase has done nothing to tackle inflation. But their increase has undoubtedly fuelled an increase in the cost of living. In particular, they have fuelled rent increases and increases in mortgage costs, both of which have considerably increased economic vulnerability in the UK. They have also fuelled inflation in a perverse cycle of harm.
There are at present no signs that the new era of excessive interest rates - now running at rates well ahead of inflation - will end. That means the active upward redistribution of wealth in the UK. will continue. And that is a disaster in the making.
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They failed to see it rising, they’ll fail again on the way down and we’ll end up with deflation.
Quite possibly
Might the explanation of the purpose of high interest rates being to address inflation be a deception?
Yes
For information on the future direction of UK interest rates, listen to the US FED later on today.
We dance to their tune these days.
I suppose that this fall in inflation will be hailed by the Chancellor as a stunning achievement and how their plan is working. I would like to know what exactly he has done to reduce the rate of inflation? Apart from a policy of austerity and depriving the public sector of funds of course. Has he not learned from the Great Depression of the 1930s?
After all he cannot claim credit for when it falls when he blamed global factors thata were beyond his control for the leap in inflation.
Precisely nothing is the answer
Either the Bank of England are incompetent (which I try hard not to believe),
or they have a deliberate ploy to funnel money via interest rates, to the financial sector to enrich those who need it the least.
It’s both
Mr Tresman,
Why is the incompetence of the Bank of England hard to believe? We had a reminder of its characteristic, unsurprising appearance with the BoE blunder over LDIs in the Pension Industry, conveniently hidden by the chaos overwhelming the Truss government. We had the failures in the BoE in the lead up to and the solution to the 2007-8 Financial Crash; then there was the 1929 Depression (if you can find any financial wisdom in official circles in London, i suggest you are making it up); then there was the 3% War Loan failure, 1914; the near fatal 1825 Banking crisis (read the 1832 Committee of Secrecy Report, 1832 – they still didn’t understand, and didn’t want to understand, seven years later. Then there was the whole South Sea bubble (1720) catastrophe ……. these are only the biggest howlers, the ones that lay waste to large parts of Britain. And I can only go back to 1694. It is likely to happen even more, because the speed of digital and AI change is accelerating exponentially; and the BoE wisdom …… um, isn’t.
You are surprised they may be incompetent. Really? I mean, really?
“Why is the incompetence of the Bank of England hard to believe?”
Because their actions may well be deliberate and they know full well what they are doing.
But your evidence is strong
Time to replace the bank of England with a Bank of Britain for all public sector finance.
This would save public money wasted on fees and interest rates and charges going to bankers bonuses.
Nat west is still partly public owned.
And already deals with the public sector finances.
So, let me get this straight, what you saying is as follows:
In the past, following an inflation shock, central banks have raised rates and inflation has come down, with the expected lag. This is what has happened in the US, the UK and Europe.
Your conclusion from this is that this is evidence that central banks should not have raised rates as inflation would have come down anyway, despite nothing to support that claim?
What have I missed?
You entirely miss the point.
Over 500 years the pattern of inflation spikes followed by a return to normal or deflation has been consistently seen.
Central bank activity on this is very, very recent and not evidence based.
Do you deliberately misunderstand things?
I can’t understand why Council Tax increases are not factored into the rate of inflation figures. For many people the rise in Council Tax will completely wipe-out any benefit they have had from the NI reduction or even the increase in the State Pension… And of course, when I talk to neighbours about the increase ( 11%) here, they just blame the local council for its perceived incompetence, forgetting-or never realising- that the local authorities must rely on Government largesse for the majority of their income.
Good point….
Monthly CPI price index
Month CPI Change since 05/23
2023 05 131.3 0.00%
2023 06 131.5 0.15%
2023 07 130.9 -0.30%
2023 08 131.3 0.00%
2023 09 132.0 0.53%
2023 10 132.0 0.53%
2023 11 131.7 0.30%
2023 12 132.2 0.69%
2024 01 131.5 0.15%
2024 02 132.3 0.76%
Little changed over almost year
I agree
Inflation has gone, for now