The Office for National Statistics has published new inflation data. As they note:
- The Consumer Prices Index (CPI) rose by 1.7% in the 12 months to September 2024, down from 2.2% in August.
- On a monthly basis, CPI was little changed in September 2024, down from a rise of 0.5% in September 2023.
- The largest downward contribution to the monthly change in CPI came from transport, with larger negative contributions from air fares and motor fuels; the largest offsetting upward contribution came from food and non-alcoholic beverages.
- Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.2% in the 12 months to September 2024, down from 3.6% in August; the CPI goods annual rate fell from negative 0.9% to negative 1.4%, while the CPI services annual rate fell from 5.6% to 4.9%.
Despite the obvious conclusion that inflation is now beaten - as I long suggested it would be, simply because of the effluxion of time - I notice that Andrew Bailey from the Bank of England is now demanding that national insurance be increased on wages because of the risk from a recurrence - which does not exist unless there is a massive escalation in the conflict in the Middle East, which is an issue over which the rate of national insurance on UK wages has no impact (although I doubt he understands that).
It really is time for the Bank of England to say that this episode of inflation is over, which it is, all bar the fact that interest rates remain way too high.
How much too high? At least two per cent too high on the basis of any reasonable analysis, and I would argue three per cent too high on the basis that bank base rates should at most seek to maintain the value of money - and so be no more than the inflation rate, or even a little less.
If that reasoning was to be adopted, we would have a totally different economic outlook in the UK and no more risk of inflation than we have now. But how likely is that to happen when high interest rates keep the money flowing upward within our economy and people chained to their jobs to service their debt obligations? There is very little chance at all. But when I said this morning that at some time, there is going to be a massive rejection of this economic model, fuelled maybe by a crash or even precipitating a crash, then I think I am right. Debt oppression of the sort we have cannot last.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
As the great Warren Mosler once said “why give money to people who’ve already got money?”
Well that’s easy Kevan.
Because some if it (and any of it is too much) comes back to the politicians who ensure that wealth is over-rewarded as party funding.
It’s a self-rewarding cycle, like most things in this septic isle organised for the Establishment.
Back to post Global Financial crisis ultra low inflation because the underlying economic activity is still flat on its back from that event?
Why do you think negative real rates are appropriate and what impact do you think that would have on investment?
Because interest serves no economic purpose but to reallocate wealth upwards and low rates will massively increase investment because almost all investment is paid for with borrowing.
Why don’t you trolls do some research? Or even some thinking.
Have you ever managed to have a discussion with someone that disagrees with you, without becoming abusive?
Have you ever thought that perhaps people working in the markets for decades might actually know more than you and that you can’t actually be an expert in absolutely every topic you try and comment on?
Have you ever thought that if you really were as clever as you try and pretend, that you’d actually be advising governments an global corporates?
Oh dear, Joe. You really are a silly-billy.
Firstly, an hour or two ago you went by the hame of Natalie.
Secondfly, no one hwo has commented on here this morning works in markets – you included.
Third, in my times I have advised or actively engaged with, at their invitation:
The government of Jersey
The EU
The UK Treasury
The OECD
The World Bank
The TUC
Unite
PCS
And I created country-by-country reporting, led much of civil society engament on Base Erosion and Profits Shifting and delivered CBCR and automatic information exchange.
And I have been invited to G20 and G7/8 summits.
What have you done?
…. but they are not negative.
1 Year Sonia swaps are over 4% versus expected inflation of about 2%. ie. Real (and I mean inflation adjusted) rates are in excess of 2%.
Sure, depositors over the last few years have, in real terms, lost money….. but three things
(1) What should they have done with their money?… even if they knew inflation was going to spike? You can’t “buy inflation” and assets that might match inflation often do not and carry considerable risk versus cash.
(2) The past is gone. There is no reason for depositors to expect prior “losses” to be recouped with high real rates in the future.
(3) Real rates are market rates less future expected inflation… and YoY CPI is backward looking.
Thanks
“Debt oppression” – a succinct summation.
Perhaps I am being cynical, but why does CPI, when September CPI is used to inform the increase in state benefits to be applied from next April, seem to drop in September? Why does the price of power increase in October, after the rate of benefits increase has been set? Is this ‘just coincidence’?
Weird, isn’t it
But there was at least one year (2022, I think) when it went up a lot, although not to its peak
I suppose it is also a valid question to ask why September figures are used, so the benefits increase is 6 months out of date. Apparently the DWP system is so antiquated that it takes them 6 months to apply the increase. Allegedly.
When will governments (of either red or blue persuasion) accept that inflation which is driven by global events, such as Russian invading Ukraine, is outwith their control and interest rate changes do nothing to impact it?
For example Sunak explaining the increase in inflation was nothing to do with him, but then claiming all the credit when it dropped (which it was always going to given it’s measured by YoY increase!)
One day, maybe
But they did enjoy raising rates