U.K. inflation just blew past expectations, and is well above the inflation target of 2%.
The government once again tried to say that this was a temporary situation, but not all are sold.
Excuses, excuses. The fact of the matter is that as Simon Ward, chief economist at Henderson Global Investors, points out in his always excellent blog, at 5.3 per cent, RPI inflation is now higher than at any stage since the Lawson boom. Savers are in effect being milked to subsidise the profligate and allow them to escape their debts. If this is called rebalancing the economy way from debt fuelled consumption towards saving and investment, then I’m a banana.
Rewind to the Bank of England’s Inflation Report of May last year and you will see that the central forecast for CPI inflation by now was less than 1 per cent. The 2.7 per cent discrepancy cannot be wholly explained by energy prices and VAT. Nor does the weakness of sterling provide an adequate explanation. Sterling is in fact slightly stronger against the euro than it was a year ago.
Basically, don’t write-off a U.K. inflation problem in the works as we speak. The latest April data showed an acceleration vs. March after all.
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