delusionofgrandeur

The ONS announced today that the CPI and RPI index measures of inflation have increased from their frankly absurd lows where CPI was just 1.8%

I say absurd because the while the CPI figure was descending, it became clear that fuel, food and basic necessities inflation was rocketing up. It has recently been reported that supermaket price inflation on groceries has been running anywhere between 10 and 16%, this is said to be caused by poor crops and high transportation costs. Of course, the fuel price is going up fast with a barrel of Brent crude costing more than $90US at the end of last week. This has a knock-on effect for energy prices as some powerstations are oil fired.

It has been widely rumored that the items in the CPI basket are regularly manipulated in order to produce a desirable CPI figure. This has lead some to complain that they cannot eat their iPods and that music downloads cause poor performance when used as fuel for their vehicles.

The ONS states that the new CPI figure of 2.1% is off the back of the increasing fuel price. The Retail Price Index is now up to 4.2%

The Bank of England’s only method of control over inflation is to set interest rates which now stand at 5.75% It appears they may need to go higher still to curb inflation.

Worryingly, the fuel price is continuing upwards. Last week I wrote that the AA were reporting the average price of a litre of petrol as having exceeded £1/litre. During last week, the price was increasing at an average of 0.2p/litre/day (and this continued through the weekend). However, into today, the fuel price increased at 0.3p/litre/day which would mean a 2.1p/litre a week increase in the price should this trend continue. The recent and suddenly high price of Brent crude may be yet to filter through to the ‘pump’ so there is potential for the price trend to stay.

This fast increase in the price of fuel is bound to force the reported rate of inflation higher.

This entry was posted on Tuesday, November 13th, 2007 at 5:36 pm and is filed under Fantasy House Prices, Ramblings.You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.