UK Inflation Down: Where Art Thou, Green Shoots?

Figures released today show the relatively stable CPI inflation rate down nearly 20% on last month, from 2.2% to 1.8%. This measure has long been discredited as it removes housing costs which are the biggest single component of most peoples’ outgoings in the the UK.

The RPI is much better and this shows a drop from -1.1% to -1.6, drop of nearly a third.

The UK is definitely in a deflationary tailspin and the numbers are going to get worse. Only a year ago oil was at nearly $150 and today it is at nearer $50. There is a huge drop to be factored in over the next 3 months. CPI itself may well go negative for a time.

With this is sight, there is no chance of the UK raising bank rates, nor really do I think the Bank of England will stop Quantitative Easing either, despite the respite they have given in the past month.

It is a big jump to see hyper-inflation from here, it may come to pass if too much money is pushed into the system to try and heal it. However, it looks as if the monetary stimulus is increasingly pushing on a string. The debts need to be paid down and the economy (including Public Sector) needs to re-balance to adjust the the new size of the market.

Shame the Labour government wasted all our money in the good times as now would have been a very propitious time to spend more public money to keep us going; sadly, as we are broke this is no longer an option.

It is a long way up from here, years not months.

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