Is rising inflation looming?

[TheMotorcycleBoy]

I still take the view that in this iteration any inflation spike is likely to be short-lived. Even the previous poster lists deflationary factors in his argument for future inflation!

Such as?

Increase in base rate. Rising council tax.


GS

Rising council tax. We can argue that's inflationary. The councils will have more money to spend, they'll spend. Workers will feel more impoverished, they'll demand rises.

[TheMotorcycleBoy]

German tabloid attacks ECB chief Lagarde as 'Madam Inflation'
FRANKFURT, Oct 30 (Reuters) - Germany's best-selling tabloid Bild scathingly criticised European Central Bank (ECB) President Christine Lagarde on Saturday, accusing her of destroying the earnings and savings of ordinary people by tolerating a rise in inflation.

The article, echoing a Bild attack on Lagarde's predecessor Mario Draghi in 2019, may signal fresh hostility towards the ECB on the part of the German public, which has for a decade been sceptical of the bank's ultra-easy policy.

Two days ago the bank left rates policy unchanged despite consumer price growth hitting a 13-year high. read more

The newspaper called Lagarde "Madam Inflation,", accusing her of being a high-earner who liked wearing luxury fashion and saying she didn't seem to care about ordinary people's difficulties. "Christine Lagarde is melting pensions, wages and savings," it said.

Asked about the article by Reuters, an ECB spokesperson noted that in her Thursday news conference Lagarde had acknowledged inflation is "clearly of concern" to citizens, and said policymakers did a "lot of soul-searching" before holding off on tightening policy. read more

Bild's attack comes a week after German central bank chief Jens Weidmann, an outspoken critic of ECB policy, quit his job, arguing that 10 years in the role is enough while also warning over inflation risks. read more

Inflation in the euro zone hit 4.1% this month, equalling its all-time-high, while German inflation is even higher, likely approaching 5% by year end. read more

Yes, CB chiefs are determined to talk down inflation.

https://www.reuters.com/world/europe/ge ... 021-10-30/

[GoSeigen]

Such as?

Increase in base rate. Rising council tax.


GS

Rising council tax. We can argue that's inflationary. The councils will have more money to spend, they'll spend. Workers will feel more impoverished, they'll demand rises.

So sorry but this makes no sense. Councils don't charge for any of their services. They might spend more but the price level will be unaffected (medium term). Meanwhile council tax payers will feel a squeeze on their budgets and struggle to pay higher and higher prices so IMV companies will only have pricing power in relation to genuine supply shortages. One might argue that wages are going to be growing in real terms but I can't see that as consistent with the likely low growth ahead.

Then one might argue that actually there won't be low growth. My initial premise was low GDP growth; I see little evidence to question that but if others disagree it's a discussion we could have on a different thread.

Incidentally I agree about workers demanding pay rises but think that is a process of years and unlikely to affect the economy much in the near term.

GS

[TheMotorcycleBoy]

The rising council taxes will in part be used to give council employees a commensurate wage rise in the near term. Which will support further price rises.

Some workers won't be content to, as you put it, "struggle". They will vie for a pay rise (now), and competing firms will poach the disgruntled with offers of more wonga. Which will support more price pressure, and firms paying more wages, will forward their increased wage bill to their customers by either price rises or stealth i.e. shrinkflation. I'm in my 50s now, and don't anticipate myself putting up that much of a fight. But in my 20s-30s I certainly would have; and I know that many youngsters will be exhibiting just this behaviour over the next year so.

As people have remarked inflation can act like a vortex. Its possible that we may be stuck with it for sometime.

Matt

[dealtn]

Non-transitory inflation means prices are rising year after year after year.

And the list of years in the last 50 years with a negative RPI annual inflation rate looks like what?

[gryffron]

Some workers won't be content to, as you put it, "struggle". They will vie for a pay rise (now), and competing firms will poach the disgruntled with offers of more wonga. Which will support more price pressure, and firms paying more wages, will forward their increased wage bill to their customers...

You only have to watch the news now to see that Unions are pushing for high pay rises now because inflation WILL BE 5%. If they're pushing before it happens, and continue to push after it happens, then the effect on subsequent prices will not be temporary.

So I agree with you. The Central Bankers cannot know that these pressures are a "spike". They're saying that to try an placate workers. but there is great danger that a spike cause by short term effects quickly turns into a long term effect.

Gryff

[GoSeigen]

Non-transitory inflation means prices are rising year after year after year.

And the list of years in the last 50 years with a negative RPI annual inflation rate looks like what?

Gawd you certainly have a bee in your bonnet about this!! As you should know by now my interest is not in inflation close to the 2% target of Central Banks; I consider that inflation quite acceptable and nothing to really worry about. When talking about inflation spikes this discussion is about inflation 100s of bp above that target.

RPI also is not of much interest to me. I don't think its arithmetic summing is correct, geometric makes more sense to me, so for me CPI is the preferable measure.

So what I was referring to in the quote above was the idea that we could have a decade or more of sustained inflation at (say) 4% or above, which would be IMO a significant departure from the situation in the past 20-25 years.

GS

[Albert90]

Rising inflation is mostly a result of money supply and supply and demand. So, the answer to that question will be determined by how much money is in circulation, and if any crucial supplies run out. More importantly, what do you mean by "looming"? It's impossible to know for sure right now because we're just at the beginning of a recession... but if your definition of looming is something like "incoming", then yes--it certainly seems as though it might happen. In which case investing for this type of event would make more sense than losing all your investments on some other buy-high market strategy which frequently leads to losing 90%+ from peak prices during a recession.

[CliffEdge]

RPI well on its way to 10%

[BT63]

RPI well on its way to 10%

And central banks can't do much about it without crashing bond and stock markets or causing a deep recession. I think their incompetence could well eventually end up causing the worst of everything to happen all at once; inflation + bear markets + recession.

We will continue to see big talk but little action. The Fed's suggestion on Wednesday of three interest rate rises each of the next few years sounds like they're doing something but that would only take rates to about 2.5% in 2024.

[Albert90]

There is no definitive answer to this question. Some economists say that inflation is already on the rise, while others maintain that it is still relatively low and under control.

However, there are a few factors that could lead to a rise in inflation in the near future. For one, the economy is starting to heat up again, with wages and prices both increasing. Additionally, the Federal Reserve has been gradually raising interest rates, which could lead to higher prices as businesses pass along their increased costs.

If inflation does start to increase, it could cause problems for both consumers and businesses. For consumers, rising prices can mean less money available to spend on other things. And for businesses higher inflation can lead to decreased profits.

[ursaminortaur]

There is no definitive answer to this question. Some economists say that inflation is already on the rise, while others maintain that it is still relatively low and under control.

However, there are a few factors that could lead to a rise in inflation in the near future. For one, the economy is starting to heat up again, with wages and prices both increasing. Additionally, the Federal Reserve has been gradually raising interest rates, which could lead to higher prices as businesses pass along their increased costs.

Raising interest rates is supposed to cut inflation as it encourages saving and discourages borrowing reducing the amount of disposable income being spent on goods.

[Alaric]

You only have to watch the news now to see that Unions are pushing for high pay rises now because inflation WILL BE 5%. If they're pushing before it happens, and continue to push after it happens, then the effect on subsequent prices will not be temporary.

Arguably that's what happened between 1965 and 1995. But what finally reduced rising prices to one or two percent per year in the 1990s? Governments of the 1970s tried prices and incomes policies, whilst that of the early 1980s tried mass unemployment. Was it globalisation with the return of Eastern Europe to the trading world and the growth of China?

[TheMotorcycleBoy]

Just over 30 quid for 2 lengths of 2m x 15mm chrome plated copper pipe from Wickes.

Ouch.

[servodude]

Just over 30 quid for 2 lengths of 2m x 15mm chrome plated copper pipe from Wickes.

Ouch.

Now, I'm imagining your motorcycle

[TheMotorcycleBoy]

Just over 30 quid for 2 lengths of 2m x 15mm chrome plated copper pipe from Wickes.

Ouch.

Now, I'm imagining your motorcycle

Lol!!

I gave up motorbikes nearly 30 years ago . Yup got serious job, car licence, met the woman of my dreams etc.

Those damn pipes are to complete a shower install I'm doing. A.k.a. the bathroom renovation project from hell.

[richfool]

Just over 30 quid for 2 lengths of 2m x 15mm chrome plated copper pipe from Wickes.

Ouch.

Now, I'm imagining your motorcycle

Lol!!

I gave up motorbikes nearly 30 years ago . Yup got serious job, car licence, met the woman of my dreams etc.

Those damn pipes are to complete a shower install I'm doing. A.k.a. the bathroom renovation project from hell.

I thought you would be focusing your energies on installing solar panels and windmills (particularly the latter today)!

[TheMotorcycleBoy]

Just over 30 quid for 2 lengths of 2m x 15mm chrome plated copper pipe from Wickes.

Ouch.

Now, I'm imagining your motorcycle

Lol!!

I gave up motorbikes nearly 30 years ago . Yup got serious job, car licence, met the woman of my dreams etc.

Those damn pipes are to complete a shower install I'm doing. A.k.a. the bathroom renovation project from hell.

I thought you would be focusing your energies on installing solar panels and windmills (particularly the latter today)!

Indeed. Was informed by Mel earlier on that our gas+electricity bill is likely to be at least £750 more this year.

[Mike4]

Just over 30 quid for 2 lengths of 2m x 15mm chrome plated copper pipe from Wickes.

Ouch.

Now, I'm imagining your motorcycle

Lol!!

I gave up motorbikes nearly 30 years ago . Yup got serious job, car licence, met the woman of my dreams etc.

Those damn pipes are to complete a shower install I'm doing. A.k.a. the bathroom renovation project from hell.

Whatever you do, don't use any push-fit fittings on chrome pipe.

Also tighten compression fittings enough to cause the olives to indent deeply enough into the pipe that you can see the indentation on the inside of the pipe. You'll have to dismantle the joint after making it to check this, then re-make it.

Anyway back on topic, I don't see how higher interest rates encourage saving (except amongst stupid people perhaps) when inflation exceeds the interest received (as it always does in my experience).

I've also heard it said raising interest rates bears down on inflation by mopping up excess disposable income. If this is the case then surely massively rising gas prices etc have the same effect only bigger, meaning interest rate rises are not necessary....

[TheMotorcycleBoy]

Just over 30 quid for 2 lengths of 2m x 15mm chrome plated copper pipe from Wickes.

Ouch.

Now, I'm imagining your motorcycle

Lol!!

I gave up motorbikes nearly 30 years ago . Yup got serious job, car licence, met the woman of my dreams etc.

Those damn pipes are to complete a shower install I'm doing. A.k.a. the bathroom renovation project from hell.

Whatever you do, don't use any push-fit fittings on chrome pipe.

Also tighten compression fittings enough to cause the olives to indent deeply enough into the pipe that you can see the indentation on the inside of the pipe. you'll have to dismantle the joint after making it to check this, then re-make it.

Don't worry! I absolutely detest push-fit fittings. With a passion!

I get the picture with olives. You're saying cos the chrome skin increases the tensile strength, don't be afraid to go reasonably tough on the torque, so the olives adequately deform around the pipe.

Matt