delusionofgrandeur

The UK’s official inflation figure (CPI) is now 3.3%, 1.3% above the target of 2%. The governor of the Bank of England has exchanged the mandatory letter of explanation with the chancellor of the exchequer.

The bank’s governor, Merv King, cites rapid increases in the price of food and fuel as to blame. The Bank of England believes that UK inflation could now exceed 4% in December. However, the BoE predicted last May that the CPI figure for this April would be circa 2% with the upper bounds of probability at about 2.6% and yet the real figure turned out at 3%

Now we have the inflation projection for May 08 onward, it makes you wonder if the upper bounds of this projection are still off low. The Bank of England has not openly committed to interest rate rises to head off inflation and as we continue to import inflationary goods, it’s hard to see how inflation is going to be brought under control in such a short period of time.

People I’ve spoken to as of this morning have generally been saying that the current CPI figure of 3% is unrealistic with real UK inflation being in the region of 10% or more. Just to look at the leaping prices on supermarket shelves give an indication of this. It seems to be the inexplicable selection of products in the Consumer Price Index basket which holds the figure artificially low.

The ONS also reports that the Retail Price Index has gone up from 4% to 4.3%

Bank of England Inflation Report May 08[PDF]

ONS UK Inflation Report May 08[PDF]

Tags: bank of england, boe, consumer price index, cpi, inflation, merv king, ons, retail price index, rpi, uk

This entry was posted on Tuesday, June 17th, 2008 at 10:51 am and is filed under Credit Crunch, Economy, Fantasy House Prices, News.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.