GBP Currency devaluation and its effect on inflation
Posted: November 15th, 2016, 12:11 pm
I am invested in a lot of inflation corporate linked bonds(http://www.fixedincomeinvestor.co.uk/x/bondtable.html?groupid=3562)
With GBP falling around 20%, what is the estimated effect on inflation in total due to the currency devaluation. A lot of price will not change by 20%, as there are a lot of costs(and taxes) specific to the UK and not imported inflation.
The four inflation linked bonds have appreciated by around 10%. Will a 20% fall in pound really affect inflation by 10%, or is it the usual swing to extremes?
[url]http://uk.advfn.com/p.php?pid=legacydaily&epic=L^TS1L&type=1&size=2&period=7&olx_1=1&o_epic1=L^PFP1&o_type1=1&o_colour1=1&olx_2=1&o_epic2=L^SVTL&o_type2=1&o_colour2=2&olx_3=1&o_epic3=L^NG1Q&o_type3=1&o_colour3=3&scheme=&delay_indices=1[/url]
I realise that it may be quite complicated to come up with a figure, but I was looking at a rough estimate. The BOE speaks of 2%/3% inflation, does it really mean that 20% currency drop causes only 1-2% inflation(the other 1% was there before too)?
I think I am missing something obvious.
Thanks in advance,
ap
With GBP falling around 20%, what is the estimated effect on inflation in total due to the currency devaluation. A lot of price will not change by 20%, as there are a lot of costs(and taxes) specific to the UK and not imported inflation.
The four inflation linked bonds have appreciated by around 10%. Will a 20% fall in pound really affect inflation by 10%, or is it the usual swing to extremes?
[url]http://uk.advfn.com/p.php?pid=legacydaily&epic=L^TS1L&type=1&size=2&period=7&olx_1=1&o_epic1=L^PFP1&o_type1=1&o_colour1=1&olx_2=1&o_epic2=L^SVTL&o_type2=1&o_colour2=2&olx_3=1&o_epic3=L^NG1Q&o_type3=1&o_colour3=3&scheme=&delay_indices=1[/url]
I realise that it may be quite complicated to come up with a figure, but I was looking at a rough estimate. The BOE speaks of 2%/3% inflation, does it really mean that 20% currency drop causes only 1-2% inflation(the other 1% was there before too)?
I think I am missing something obvious.
Thanks in advance,
ap