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January 20, 2010

Comments

Cityunslicker

Agree 100%. QE will not show up in inflation for a long while yet, maybe 2011.

Mostof the inflation we are seeing is from tax rises and post-comoodity crash 'bubble.'

Very hard to predict what is going to happen, although everything points upwards in the medium term.

Where you nail it in this piece Chris is onthe effect of devaluation; this is the main driver and if the pound continues to fall agains the dollar and euro then higher inflation is guaranteed - the spare capcity argument is a typical economists dead end. Hard to measure, impossible to then factor in as a real calculation.

Trevor Brown

I find the preoccupation with RPI breathtaking. We already have inflation - asset price inflation - since April 2009

In my view, the inflation of the 70's disguised actual asset price deflation:

http://fabooks.wordpress.com/2009/08/31/1970s-nominal-price-inflation-was-it-really-deflation/

Tom

"if the pound continues to fall agains the dollar and euro then higher inflation is guaranteed"

Um, it's going *up*, isn't it? Not with any great sense of purpose, but it's certainly not plummeting downwards.

Giles

Although the Right have made all the crassest errors about inflation - in particular the QE --> Inflation one, without considering in any way the mechanisms, I too am beginning to get a little disquieted by how stubborn it is.

However, Jamie Dannhauser of Lombard, says:

Business-to-business service
prices actually dropped by 0.9% in the four quarters to Q3. The rate of consumer services
inflation, which one assumes is more insulated from exchange rate effects, has fallen from 4.5%
to 2.6% over the last year, consistent with the output gap story.

So deflation may be there somewhere - just scrambled by a lot of one off effects that the Right are keen not to see or understand.

Econoclast

QE has not and will not affect CPI inflation on any meaningful forecast horizon. If I were at the Bank, I'd be content to see this 'persistence' in inflation. While US policymakers might yet have to contend with deflationary pressures - dangerous in an economy with too much debt - this isn't something the Bank needs to worry about. Sensibly, it allowed the pound to fall, which is the ultimate safety valve against deflation. If inflation continues to run higher than expected, the pound will stabilize or rise on expectations of higher interest rates. And vice versa.

Juicy Couture Bags

where did u find the bird, does it not on the tree?

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