Tuesday, January 16, 2007

Now We Know Why the Bank of England Raised Interest Rates

Analysts were shocked by the surprise rate hike by the Bank of England last week. Now we know the reason for the surprise move. The BoE board had inside information about the inflation numbers released to the public today. The numbers showed that consumer price inflation rose to 3,0% the highest level ever recorded with the EU-harmonized measure that was introduced in 1997, while the retail price index rose to 4,4%, the highest since 1991. More rate hikes might come soon, especially since a mere 0,1% increase in the year over year inflation would mean that BoE governor Mervyn King would be required to pen a letter to Tony Blair explaining why they've failed to keep inflation below 3% and what they intend to do about it.

The continuing collapse in the price of oil might save him from that, but non-energy inflation is clearly spiralling upward in the U.K.


Blogger Flavian said...

The price of a Big Mac is now £1,99 and one year ago the price was only £1,88.

In 1974 the price was £0,45 and the price of one copy of the Economist was raised from £0,30 to £0,35. Today I think one copy of the Economist is £3,10.

So taking into consideration that the realtive price of a Big MAc seems to be falling the recent price hikes indicate a massive inflation in the UK.

To that comes that the Big Mac index indicates that the real exchange rate of the Pound is very strong, which to some extents hides the "true" inflation rate.

So Britain is certainly plagued by a high inflation rate at the moment.

10:20 PM  
Blogger Flavian said...

Today I checked the price of one copy of The Economist and found out that the price has been raised to £3,30 or 66 shillings. In 1957 the price was raised from 1 shilling or £0,05 to 1 shilling 6 pence or £0,075.

British inflation is obviously in "good" shape.

2:22 AM  

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