Inflation
 

Was reading in the paper about the proposed 2p per litre tax increase due shortly. Given that a 2p increase is roughly 2% and with a 2% increase on transport this effectively increases the price of everything transported by road by 2% of the transport cost within the items cost it seems to me to be a little silly that the Government requires the BOE to keep inflation down to a max of 2% when they're driving inflation up themselves.

Re: Inflation
 

Yes, but if manufacturing costs of the vehicles and the goods produced are less than 2%, there is a balancing factor.

Re: Inflation
 

2p on petrol tax is dwarfed by the effect of the post-Iraq oil price rises.

What we're forgetting slightly is the ability to cut costs by using fuel more efficiently, which becomes ever more incentivised with every increase. Also manufacturing costs for the goods are still falling and there's always those East European hauliers. What do you want, inflation or roads full of Polish truckers blindly following the satnav under low railway bridges? Difficult one.

Still, stagflation (a recession where prices go up) is a definite possibility, which is great news, particularly if you have a large recent mortgage. Why? Because it reduces the value of your debt so you have to work less to pay it off, plus interest rates have to come down to try and cure the recession so you pay less interest. Kerching time, if you keep your job that is.

Inflation is bad if you have lots of savings, stagflation is doubly bad because you don't earn interest on them, but it's great if you have lots of debt.

Re: Inflation
 

I'll stick to 56ppl thanks.

Re: Inflation
 

We dont have stagflation, inflation is predicted to go up to 3% this year which will stop interest rates dropping and therefore mean people dont have the money to spend to keep the econonly bouyant. My point is that the Government can help to cut inflation by not increasing taxes on fuel, however they choose to hit us twice by increasing taxes and then the BOE increase interest rates to try to control inflation.

Whilst i agree manufacturing costs are dropping, this doesnt help our economy much as it usually means that the manufacturing has been shipped abroad and yet more money flows out of the country

Re: Inflation
 

We don't have it in the same way that someone falling off a skyscraper is perfectly healthy as he accelerates past the 20th floor. If inflation is going up and growth is going down, that contains the seeds of stagflation unless the interest rate cuts haul growth back up.

Irrelevant to this, what matters to inflation is whether the goods people buy are cheaper. If they were made in the UK they'd be more expensive, which pushes inflation up. The problem with fuel price rises comes when goods start to become more expensive and stop cancelling it out. It's no use looking just at one aspect of the economy which is why inflation uses a basket of things. Considering how much fuel's gone up by it's amazing that inflation is as low as it is, which can only be because the cost of goods has come down (how much was your last DVD player? Mine was under £20. My first one was £179. That's a lot of fuel tax I can buy instead - about 175 tankfulls, in fact).

Re: Inflation
 

Because the government needs extra tax revenue to cover the pay rise they have just voted for! :mad:

Re: Inflation
 

Because they want to be able to afford to buy fuel etc :mad: Funnily enough raising wages is also a reason interest rates wont drop so again the government is manipulating us

Re: Inflation
 

Re: Inflation
 

Good news on inflation - heroin and cocaine have dropped 20% in price wholesale! Wonder if that one gets factored in?

Re: Inflation
 

Fed up paying through the nose, or does it cost an arm and a leg?

Re: Inflation
 

real inflation is around 5%.

Re: Inflation
 

Unless you buy bread, meat, cheese, milk, butter, petrol, and a mortage.. then it's a lot higher...