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Re: Is rising inflation looming?
Posted: August 5th, 2021, 4:27 pm
by monabri
88V8 wrote:Itsallaguess wrote:The UK inflation rate rose to 1.5% in the 12 months to April, up from 0.7% in March, official figures show.
The only good thing about the 70s was hot pants.
V8
Never could get them in my size, though....
Re: Is rising inflation looming?
Posted: August 5th, 2021, 9:27 pm
by GoSeigen
murraypaul wrote:BOE sees inflation reaching 4% this year.
GoSeigen sees inflation reaching 4% this year:
viewtopic.php?p=423842#p423842
GS
Re: Is rising inflation looming?
Posted: August 15th, 2021, 11:28 am
by TheMotorcycleBoy
Stealth inflationCertainly seeing "inflation in disguise" right now. Mel and I took the 16 yr old and her mate out for slap up pub grub yesterday (Greene King food pub, Caldecotte Mill in MK). The pricing didn't look much different than usual, but we'd all agree that the portion sizes were noticeably smaller. I could see a lot more crockery through the food when the meals first arrived, and assuming my usual "dustbin role" of helping the girls finish their meals (sorry I guess I've inherited this trait from the old man, who was a war baby) wasn't amazingly taxing. All the puddings looked a bit smaller than usual
It was still a nice meal out, (service was great) but there's definitely someone out there cutting costs in the face of rising prices.
Matt
Re: Is rising inflation looming?
Posted: August 15th, 2021, 12:02 pm
by quelquod
A few random points I’ve noted. Our hairdresser has put their prices up by an average of 30% (due to cost of Covid measures and reduction in number of permitted seats). Gas/electricity up from £135 to £179 as fixed deal ends. B&Q compost and bark prices up by approx. 20% this year. Garden centre plant prices up by around 50-100%. Average weekly food shopping bill at ASDA up by around 12%. Then the steady rise in diesel price and so forth. It’s not hard to see inflation going over the 4% this year. Even my local golf course has effectively raised its price (to me) by 20% or so by scrapping the cheaper Monday-Friday only ‘seniors’ subscription!
Re: Is rising inflation looming?
Posted: August 15th, 2021, 12:28 pm
by richfool
Yes, I too see lots of prices rises, though mostly in the hotel and hospitality industry.
I live in a holiday resort town.
2 nights self-catering in a 2 bed mid terraced town house holiday home in November - £600.
4 nights in another with sea view, (both 2 beds for 4 people) in October - £1000
Crab sandwiches 2 summers ago £5.50 - £6.50. Now £8.70!
My friendly coffee shop/wine bar, 18 months ago was £2.60 for a latte, then earlier this summer re-opened at £2.75 and now a couple of weeks later up to £2.85.
Same place, speciality gins with tonic £6.00 - 2 months ago. Then 2 weeks ago, I was charged £6.60 plus a 10% service charge (sitting outside). I shan't be returning.
I can appreciate that the hospitality industry is seeking to recover some of the ground lost during the covid lockdown, but to me there is a limit, I consider these prices and tactics as unacceptable and vote accordingly with my feet.
Regarding inflation and interest rates, I was listening to a Kitco interview on YouTube yesterday. The gist was that, despite rising inflation, the Fed would be inhibited from raising interest rates because it would result in a stock market crash. It might raise them by 0.25 points, but that would then unnerve markets and cause equities to fall. It can't raise them by much because of the huge debts that it would have to service at higher interest rates and that slowly markets would realise that and equities would fall and gold recover again. The Fed (and presumably other central banks) has little choice but to try and "inflate" away the huge debts.
I just found the link:
https://youtu.be/eHH6CZo1JnA In another interview the "expert" was advising avoid US and big name tech and growth stocks and seek out alternative assets and value stocks.
Re: Is rising inflation looming?
Posted: August 16th, 2021, 7:56 am
by TheMotorcycleBoy
richfool wrote:Regarding inflation and interest rates, I was listening to a Kitco interview on YouTube yesterday. The gist was that, despite rising inflation, the Fed would be inhibited from raising interest rates because it would result in a stock market crash. It might raise them by 0.25 points, but that would then unnerve markets and cause equities to fall. It can't raise them by much because of the huge debts that it would have to service at higher interest rates and that slowly markets would realise that and equities would fall and gold recover again. The Fed (and presumably other central banks) has little choice but to try and "inflate" away the huge debts.
I just found the link:
https://youtu.be/eHH6CZo1JnA
Thanks for your thoughts and the link, Rich
I have read similar views, i.e. that CBs are trapped into maintenance of close-to-zero rates.
In another interview the "expert" was advising avoid US and big name tech and growth stocks and seek out alternative assets and value stocks.
Which of course is contrary to the narrative of perpetually low rates.
I'm wondering now if fear of inflation is the motivation behind the strong recent recovery of bitcoin. What's the conclusion for us equity investors? Presumably keep buying, since we lose out holding cash?
Matt
Re: Is rising inflation looming?
Posted: August 18th, 2021, 12:06 pm
by murraypaul
https://www.bbc.co.uk/news/uk-58254000The UK inflation rate fell to 2% in the year to July as the economy continued to reopen from Covid-19 restrictions.
The Consumer Prices Index (CPI) measure of inflation dipped from 2.5% in the year to June, the highest level for nearly three years, the Office for National Statistics (ONS) said.
The rate fell to the Bank of England's 2% inflation target, after being higher for two months in a row.
Re: Is rising inflation looming?
Posted: August 18th, 2021, 1:32 pm
by richfool
Further extracts from that same BBC article, with my emphasis in bold:
Inflation pressures
Yael Selfin, chief economist at KPMG UK, said the rate dip "masks the strength of inflationary pressures currently within the UK economy".
"We expect inflation to accelerate further during the rest of this year, rising significantly above the Bank of England's 2% target, as supply chains remain under strain faced with a strong rebound in demand," she added.
The Retail Prices Index (RPI), a separate measure of inflation, increased to 3.8%. The number in July is typically used to calculate rises in regulated rail fares.
However, the government said no decision had been made on national fares, with a spokesman stating it is "considering a variety of options".
Inflation came in lower than expected, bang on the Bank of England's target of 2%, thanks to a fall in the price of clothing.
But some of the comparisons reflect last year's reopening trends, for example in July 2020 clothes prices did not fall, as is usual during the sales.
Some prices are difficult to calculate, such as package holidays.
Other prices are still surging, such as the used car market, when in July the 12-month inflation rate was 14%, reflecting shortages of new cars due to difficulties in semiconductor production. Petrol prices are well up on a year ago too.
So the broad story is that this is a pause for breath as inflation marches towards 4% this year.
But the fact it has dipped provides more support for the majority of Bank of England decision makers on the Monetary Policy Committee who believe that the anticipated rise will be temporary and does not need an immediate response, in order to contain it.
Re: Is rising inflation looming?
Posted: August 25th, 2021, 4:35 pm
by TheMotorcycleBoy
richfool wrote:Regarding inflation and interest rates, I was listening to a Kitco interview on YouTube yesterday. The gist was that, despite rising inflation, the Fed would be inhibited from raising interest rates because it would result in a stock market crash. It might raise them by 0.25 points, but that would then unnerve markets and cause equities to fall. It can't raise them by much because of the huge debts that it would have to service at higher interest rates and that slowly markets would realise that and equities would fall and gold recover again. The Fed (and presumably other central banks) has little choice but to try and "inflate" away the huge debts.
Although letting inflation rise, in order to "inflate" away debts may sound like a good idea in the near term, it's going to be problematic for governments long term because future spending will be more expensive, due to this inflationary effect. Hence without austerity, a bigger pile of debt will grow in order to fund public spending, continually needing to "inflate" away ever more.
Matt
Re: Is rising inflation looming?
Posted: August 25th, 2021, 5:26 pm
by ursaminortaur
TheMotorcycleBoy wrote:richfool wrote:Regarding inflation and interest rates, I was listening to a Kitco interview on YouTube yesterday. The gist was that, despite rising inflation, the Fed would be inhibited from raising interest rates because it would result in a stock market crash. It might raise them by 0.25 points, but that would then unnerve markets and cause equities to fall. It can't raise them by much because of the huge debts that it would have to service at higher interest rates and that slowly markets would realise that and equities would fall and gold recover again. The Fed (and presumably other central banks) has little choice but to try and "inflate" away the huge debts.
Although letting inflation rise, in order to "inflate" away debts may sound like a good idea in the near term, it's going to be problematic for governments long term because future spending will be more expensive, due to this inflationary effect. Hence without austerity, a bigger pile of debt will grow in order to fund public spending, continually needing to "inflate" away ever more.
Matt
UK debt is mostly fixed interest with fairly long maturities so can be inflated away for a while before needing to be rolled over at the newer higher rate needed to counteract inflation. And at least theoretically QE could be unwound, which should have a deflationary effect, as an alternative to raising interest levels to counteract inflation.
Hopefully though GDP growth will, as in the past, be higher than inflation which will mean that the debt/GDP ratio will fall anyway.
https://www.oecd.org/economy/united-kingdom-economic-snapshot/Strong GDP growth of 7.2% in 2021 and 5.5% in 2022 is projected as a large share of the population is vaccinated and restrictions to economic activity are progressively eased. Growth is driven by a rebound of consumption, notably of services. GDP is expected to return to its pre-pandemic level in early 2022. However, increased border costs following the exit from the EU Single Market will continue to weigh on foreign trade. Unemployment is expected to peak at the end of 2021 as the Coronavirus Job Retention Scheme is withdrawn. Inflation is set to increase due to past increases in commodity prices and strong GDP growth, but should remain below the 2% inflation target.
Re: Is rising inflation looming?
Posted: August 25th, 2021, 6:44 pm
by GoSeigen
ursaminortaur wrote:
UK debt is mostly fixed interest with fairly long maturities so can be inflated away for a while before needing to be rolled over at the newer higher rate needed to counteract inflation.
UK debt is NOT mostly fixed interest. 45% of it is funded by issuance of Central Bank reserves, this means the median maturity of UK debt is just four years. This is great for investors but pretty poor for the taxpayer. Inflation is going to be uncomfortable for the public finances unless a long-term debt issuance campaign is undertaken sometime soon (targetting of course the dumb money).
GS
Re: Is rising inflation looming?
Posted: August 25th, 2021, 7:17 pm
by ursaminortaur
GoSeigen wrote:ursaminortaur wrote:
UK debt is mostly fixed interest with fairly long maturities so can be inflated away for a while before needing to be rolled over at the newer higher rate needed to counteract inflation.
UK debt is NOT mostly fixed interest. 45% of it is funded by issuance of Central Bank reserves, this means the median maturity of UK debt is just four years. This is great for investors but pretty poor for the taxpayer. Inflation is going to be uncomfortable for the public finances unless a long-term debt issuance campaign is undertaken sometime soon (targetting of course the dumb money).
GS
The OBR says that by the end of its latest round of QE the mean maturity will have reduced to around 10 years. However in an inflationary environment QE could be unwound.
https://obr.uk/box/debt-maturity-quantitative-easing-and-interest-rate-sensitivity/March 3rd, 2021
The average maturity of UK government bonds (known as gilts) is longer than the average maturity of government debt in most other advanced economies. But the average maturity of the net debt of the public sector as a whole (including the Bank of England) has shortened considerably since the global financial crisis. This is due to large-scale gilt purchases by the Bank of England, via its Asset Purchase Facility (APF), as part of its quantitative easing (QE) operations.
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The Bank has not yet completed all the purchases necessary to complete its latest round of QE, but the effect of the £750 billion worth of gilts by the end of 2020 has been to reduce the effective mean maturity of the gilt stock to 11 years. By the end of the current gilt purchase programme in 2021-22, it will have fallen further to around 10 years.
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* In a benign scenario where the increase in interest rates reflects higher economic growth, the debt stock could ultimately be lower and the primary balance more favourable, all resulting in a virtuous fiscal circle.
* But malign scenarios are possible too. If interest rates rise because investors demand a higher risk premium for some reason, this would be more likely to be accompanied by a deteriorating economic and fiscal position, resulting in a vicious fiscal circle. In such circumstances, governments can find it difficult to make the spending cuts and tax rises necessary to restore the debt trajectory to a sustainable path.
Re: Is rising inflation looming?
Posted: August 26th, 2021, 10:29 am
by TheMotorcycleBoy
ursaminortaur wrote:TheMotorcycleBoy wrote:richfool wrote:Regarding inflation and interest rates, I was listening to a Kitco interview on YouTube yesterday. The gist was that, despite rising inflation, the Fed would be inhibited from raising interest rates because it would result in a stock market crash. It might raise them by 0.25 points, but that would then unnerve markets and cause equities to fall. It can't raise them by much because of the huge debts that it would have to service at higher interest rates and that slowly markets would realise that and equities would fall and gold recover again. The Fed (and presumably other central banks) has little choice but to try and "inflate" away the huge debts.
Although letting inflation rise, in order to "inflate" away debts may sound like a good idea in the near term, it's going to be problematic for governments long term because future spending will be more expensive, due to this inflationary effect. Hence without austerity, a bigger pile of debt will grow in order to fund public spending, continually needing to "inflate" away ever more.
Matt
UK debt is mostly fixed interest with fairly long maturities so can be inflated away for a while before needing to be rolled over at the newer higher rate needed to counteract inflation. And at least theoretically QE could be unwound, which should have a deflationary effect, as an alternative to raising interest levels to counteract inflation.
I wasn't really talking about existing debt maturities. I was attempting to critique the way that economic commentary attempts to play down inflation as a "good thing", but they ignored the fact that public spending costs (i.e. potential need for additional borrowing), will rise with inflation too. So the size of UKs debt requirement will rise.
Yes rising GDP. I don't know how much GDP ends up as tax revenue (to mitigate borrowing) so I can't really argue the toss. However, for the last decade (sorry I'm on a break so this BEEB ref. was the quickest I could find with a graph in a hurry), we've scarcely averaged 2% GDP growth.
https://www.bbc.co.uk/news/business-50373505Lets see how accurate the forecasts turn out to be.
Matt
Re: Is rising inflation looming?
Posted: August 26th, 2021, 12:12 pm
by anon155742
TheMotorcycleBoy wrote:ursaminortaur wrote:TheMotorcycleBoy wrote:Although letting inflation rise, in order to "inflate" away debts may sound like a good idea in the near term, it's going to be problematic for governments long term because future spending will be more expensive, due to this inflationary effect. Hence without austerity, a bigger pile of debt will grow in order to fund public spending, continually needing to "inflate" away ever more.
Matt
UK debt is mostly fixed interest with fairly long maturities so can be inflated away for a while before needing to be rolled over at the newer higher rate needed to counteract inflation. And at least theoretically QE could be unwound, which should have a deflationary effect, as an alternative to raising interest levels to counteract inflation.
I wasn't really talking about existing debt maturities. I was attempting to critique the way that economic commentary attempts to play down inflation as a "good thing", but they ignored the fact that public spending costs (i.e. potential need for additional borrowing), will rise with inflation too. So the size of UKs debt requirement will rise.
Yes rising GDP. I don't know how much GDP ends up as tax revenue (to mitigate borrowing) so I can't really argue the toss. However, for the last decade (sorry I'm on a break so this BEEB ref. was the quickest I could find with a graph in a hurry), we've scarcely averaged 2% GDP growth.
https://www.bbc.co.uk/news/business-50373505Lets see how accurate the forecasts turn out to be.
Matt
GDP per capita for 2020 is still at 2004 levels and probably undercounts population.
https://data.worldbank.org/indicator/NY ... cations=GB
Re: Is rising inflation looming?
Posted: August 26th, 2021, 5:50 pm
by dealtn
Probably best to make that statement in Local Currency Unit (although that diminishes your argument).
https://data.worldbank.org/indicator/NY ... cations=GBanon155742 wrote:
...and probably undercounts population.
Do you think the population count was accurate in 2004, and the imbetween years too?
Re: Is rising inflation looming?
Posted: August 26th, 2021, 11:44 pm
by anon155742
dealtn wrote:Probably best to make that statement in Local Currency Unit (although that diminishes your argument).
https://data.worldbank.org/indicator/NY ... cations=GBProbably best to make that statement in LCU at constant rates then, although that diminshes your argument and supports my initial point further.
Tell me, why would you not use a constant LCU? Constant ones are more appropriate since they actually take inflation into account.
Yes, I believe the population figure was accurate in 2004 and that it degraded since then. There is no accurate measure of immigration numbers and they are estimated via surveys. We saw that with 6 million plus EU citizens applying to remain when we were told that there were only 2.5m. Since the AC10 ascension there have been very high levels. The Home Office predicted 5000 to 13,000 per year from the AC10 up to 2010. Subsequent estimates were over 700,000 over that period. Their track record is dire.
Re: Is rising inflation looming?
Posted: August 29th, 2021, 8:54 am
by dealtn
anon155742 wrote:Tell me, why would you not use a constant LCU? Constant ones are more appropriate since they actually take inflation into account.
?
My suggestion was a constant one! Precisely as you suggest, "constant LCU".
Re: Is rising inflation looming?
Posted: August 29th, 2021, 11:05 am
by anon155742
dealtn wrote:Probably best to make that statement in Local Currency Unit (although that diminishes your argument).
https://data.worldbank.org/indicator/NY ... cations=GBanon155742 wrote:
...and probably undercounts population.
Do you think the population count was accurate in 2004, and the imbetween years too?
dealtn wrote:anon155742 wrote:Tell me, why would you not use a constant LCU? Constant ones are more appropriate since they actually take inflation into account.
?
My suggestion was a constant one! Precisely as you suggest, "constant LCU".
No it was not. Click your own link again and you will see the title: GDP per capita (current LCU).
Constant LCU shows that we are, like I said in my initial post, back to our 2004 levels of GDP per capita.
Re: Is rising inflation looming?
Posted: August 29th, 2021, 11:55 am
by richfool
It's worth bearing in mind that markets tend to anticipate what they think is going to happen, in advance of it happening, rather than waiting to see what actually happens.
Re: Is rising inflation looming?
Posted: September 10th, 2021, 7:05 am
by AWOL
Personally I think that insuring against inflation is too expensive to bother with as the markets have priced it in as soon as it was seen as a potential issue. On the other hand Gold doesn't look too elevated though but how can one know it's intrinsic value!