UK inflation 'surprisingly high' at 3.4% (target 2%)

[*T*]

Inflation: surging fuel costs push CPI to 3.4%

Inflation pushed higher in March, rising even more than expected as costlier fuel and airline tickets ramped up price pressures, according to data from the Office for National Statistics this morning.

At 3.4%, consumer price inflation (CPI) is now way above the Bank of England's government-set target of 2%. Economists had expected that it would rise given surging energy costs but had only expected an increase to a 3.2% rate from February's 3%.

One of the major pressures in March was household gas bills. They had fallen in March 2009 and were flat in March this year, helping to ramp up the annual pace of price rises.

The annual rise in the CPI's transport component, at 11.3%, was the highest since the series began in January 1997.

The retail price inflation measure (RPI), which includes housing costs and is used as the basis for many pay deals, quickened to 4.4% from 3.7% in February. It was higher than an economists' consensus forecast for 4.2%.

In your face, Sterling!

[GRG55]

Re: UK inflation 'surprisingly high' at 3.4% (target 2%)

LOL. O.5% interest rates, and 200 Billion UK Pound asset purchase programs [QE] at work.

Imagine that...

[thunderdownunder]

Re: UK inflation 'surprisingly high' at 3.4% (target 2%)

Who could have known - Does a one legged duck swim in circles, is a fishes ass water tight, do wild bears shite in the ........... OH never mind
Inflation protected bonds - a sure way to let your Government screw you for free then offer a TIP for service Bwahhahahahaha
Surgeons warning - Zero hedge can effect the way you think and act ( but their clients are so polite and very Knowledgeable and pissed/ stoned/ unemployed...)

[MarkL]

Re: UK inflation 'surprisingly high' at 3.4% (target 2%)

Just read this article entitled Why the U.S. Can't Inflate Its Way Out of Debt and it basically makes the point that the USA can't inflate it's way out of debt because most of it's debt is indexed to inflation. I've never heard EJ mention this point (although he may have) and it seems significant. Here's a quote:

And I really do mean that "essentially all" of our problems are (inflation indexed) entitlement commitments. This chart, from the Congressional Budget Office's (CBO) 2008 Budget and Economic Outlook, tells the story (the y-axis is spending as a percentage of GDP):
This is the first significant point I've found that seriously opposes EJs "Poom" position and perhaps might partially explain why Poom hasn't (or has barely) happened yet.

I'd love to hear from the iTulip community (or EJ!) on why our government should run the printing presses to pay down their debt, when all they'll be doing is inflating the indexes on which most of their debts are based? In today's fast, bit-driven economic system the "lag" time doesn't seem a sufficient enough reason. Does somebody have opposing facts indicating that most of our debt is NOT inflation indexed?

Thanks for the help! Mark

[Jay]

Re: UK inflation 'surprisingly high' at 3.4% (target 2%)

They manipulate the index to fall short of true inflation.

[hayekvindicated]

Re: UK inflation 'surprisingly high' at 3.4% (target 2%)

They manipulate the index to fall short of true inflation.

BINGO. This is why the argument that America won't inflate never convinced me. Governments will lie about inflation to the absolute max that they can get away with.

[MarkL]

Re: UK inflation 'surprisingly high' at 3.4% (target 2%)

But the Medicare drugs they must buy will go up in price irrespective of drug lying... and this is one example of the effectively indexed entitlements. Lying won't make drug purchases cheaper, eh?

[GRG55]

Re: UK inflation 'surprisingly high' at 3.4% (target 2%)

But the Medicare drugs they must buy will go up in price irrespective of drug lying... and this is one example of the effectively indexed entitlements. Lying won't make drug purchases cheaper, eh?

There's ample history and examples of similar situations in other developed countries, and what Jay posted above is exactly what will happen. In addition to the "hidden" methods of messing with the official statistics look for governments to start building public support for "temporary" partial de-indexing of certain benefits...particularly programs that are viewed by the broad public as benefiting "everyone else" [drug programs for seniors is a good example].

Partial de-indexing is easier to sell when official inflation rates are low [or quite a few people believe the economy is in deflation...which is certainly the case right now]. In that situation there is no immediate negative effect from de-indexing so it's easier to secure acceptance from a working public increasingly concerned about government deficits. Fortunately for governments, and unfortunately for citizens, the corrosive effects of inflation come from the compounding over many years...