To be fair though, isn't if the case that economists say that a small amount of inflation is good for the economy? I'm sure I read that 1.5 - 2% is thought to be the ideal level.Love your blog by the way - read it every day.
Great blog! I thought inflation was still working its magic in the UK. It's not like anything of value has gotten cheaper: transport, utilities, food. Inflation is the whip hand and the master likes to use his whip. Back to work slaves, nothing to see here!
Inflation is a tax, only it isn't authoritized by parliament.
I suspect this is a function of currency weakness.
The 2% target is a joke. Will be totally ignored until its too late. The chances of the BoE being ahead of the curve if inflation suddenly and unexpectedly surges is ZERO.We all know the debate on inflation vs deflation, all i will add is either way we are totally fucked. Not too many people will admit that but if you look at the facts you will see it's inevitable that which ever way the pendulum swings we will be spectators blowing in the wind.Good luck people...
Our wages are being set at April's inflation rate.
Anon: "I'm sure I read that 1.5 - 2% is thought to be the ideal level."It's not. That's just what the politicians/government tell us because it suits them to defraud their lenders.2% inflation represents a 50% destruction of your savings in 20 years.As VADO says, it's essentially a tax.If Inflation defrauds the saver/lender, just imagine what deflation would do to the debtor.Now ask yourself why the government will do anything it possibly can to stave off deflation?
Any steady level of inflation need not be a major problem, it can easily be priced in with interest rates. Higher interest rates tend to be counterinflationary too, reducing credit demand. Unless, of course, the inflation is caused by an institution controlling the currency. That institution can service any interest rate by literally making more money.For the government, it's either that, or have its policies dictated by the IMF, if the IMF is willing to extend a loan. Damned if you do, damned if you don't. Of course, the inflation rate still isn't exceeding 2%, hardly rampant runaway inflation, so no worries, right...?
Anon @ 08.43: "Any steady level of inflation need not be a major problem..."That's a matter of opinion.Inflation *IS* controlled by the government.In a healthy capitalist economy you are more likely to see a steady downward pressure on prices - AKA - deflation over the long term.Take for example; mass production in I.C.s, massive deflation in a very competitive sector of the economy. Look at farming, downward pressure on prices.In the latter case of course, in Europe the producer cartel AKA the EU & the Farming lobby conspire to raise the price of farm produce. So it's little surprise that food is more expensive in the EU than for example, the US.