Comments: Highest inflation on record!

The case for raising rates is really not that urgent.

Inflation is only marginally over target, and the new members of the MPC will almost certainly see sense. Current consumer confidence levels require a cut if anything.

Posted by Grahame Woolfson at July 18, 2006 12:23 PM

Marginally over target? It's 20% over target!

All this talk of the consumer needs a cut, the housing market needs a cut, the stock market needs a cut etc is effectively arguing for a UK version of the Greenspan put.

After all, where were all the voices calling for higher interest rates when the housing market was running away at 20% a year, or the stock market booming?

The BoE's remit is to target inflation. If this hurts the consumer, or the homeowner, or the shareholder, so be it. The value and credibility of our means of exchange is, at the end of the day, more important than these things. Without it, there can be no true prosperity.

Posted by El_Pirata at July 18, 2006 05:27 PM

may seem a naieve quiestion but isn't the BOE missing the majority of the information by only targeting CPI. Most inflation as always is goverment led through taxes and regulation.

They have been wilfully mis directed by the chancelor who thought that the CPI would allow him to have his cake and spend it.

El Pirata - the only way to ensure the value and credibility of our currency (I am presuming you mean) is to do away with our current FIAT system and tie ourselves to a gold/silver standard.

The two ways our cash value is whittled away is through inflation and currency devaluation, however the BOE will not recommend this as they would lose control, and the chancelor would be unable to spend money he hasn't got.

Remember the only thing now backing the pound is the goverments promise to tax us in the future.

Posted by steve shackleton at July 19, 2006 10:49 AM

The government is most likely skint. Mr Prescott and Mr Brown have worked hard to fatten themselves in recent years I think.

They're therefore unlikely to sacrifice the cash cow that is taxation in favour of reducing inflation. It's far more favourable to deny inflation completely I think. It keeps wage bargaining low, reduces the debt problem and keeps homeowners (the principal borrowers) on-side.

There are many more rabbits still in the hat.

Posted by Grahame Woolfson at July 20, 2006 09:20 AM
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