As the Office for National Statistics reported this morning:
- The Consumer Prices Index (CPI) rose by 2.0% in the 12 months to May 2024, down from 2.3% in the 12 months to April.
- On a monthly basis, CPI rose by 0.3% in May 2024, compared with a rise of 0.7% in May 2023.
- The largest downward contribution to the monthly change in CPI annual rates came from food, with prices falling this year but rising a year ago; the largest upward contribution came from motor fuels, with prices rising slightly this year but falling a year ago.
- Core CPI (excluding energy, food, alcohol and tobacco) rose by 3.5% in the 12 months to May 2024, down from 3.9% in April; the CPI goods annual rate fell from negative 0.8% to negative 1.3%, while the CPI services annual rate eased from 5.9% to 5.7%.
So, the inflation target has been met.
Admittedly, as certainly as it has fallen, it will also rise a little later this year. It is possible that inflation will be back at nearly 3 per cent before the year is out but within a stable overall trajectory. What this means are three things.
First of all, the impact of the reopening from Covid and the absurd market overreaction to the inset of the war in Ukraine has now worked its way through markets and disappeared as price increases have returned to their normal rate. This is, of course, something I have long predicted since evidence from 800 years of history says that this is what always happens.
Second, no intervention from any central bank was required to do this. In fact, they have made matters worse by suppressing markets, creating cost-of-living crises, boosting rents and increasing inequality whilst reducing investment and increasing unemployment.
Third, the wholly unnecessary interest rate rises that the Bank of England imposed on our economy to control inflation are still in place and no politician is talking about them in this election campaign, which is quite shocking. It is as if democratic control of the economy has been abandoned to an institution run by people remote from the realities of life in the UK who only have the interests of the banking sector at heart.
What should the next government be doing in response? Three things.
First, they should tell the Bank to cut rates, immediately.
Second, they should over-rule the Bank if they refuse to do so.
Third, they should reconsider the Bank of England's independence because the policy of letting it run monetary policy while the Treasury runs fiscal policy has so very obviously failed to deliver anything for this country.
I do not think there is the slightest chance of that happening with Rachel Reeves as Chancellor. As a result, the failures will continue, as will the misery for the people of the UK, who will suffer wholly unnecessary interest rates for some time to come, just to satisfy the egos of central bankers.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
inset of the war in Ukraine
Stay away from The Grauniad!
PS Just to make you jealous I’m off on the Waverley today
The Waverley Song
https://www.youtube.com/watch?v=ut5JIsKfLu4
Careful with this link. It will take you to what is in effect a plagiarism of the original song idea by my old pal the late Jim Brown.
Fourth, they should clear out those who have been captured by the banking lobby and replace them with people who will put the interests of all citizens first and foremost.
Can’t Bailey be sacked? Or perhaps I am being more than slightly overoptimistic here.
The inflation target has been met in the year to May 2024.
In the bottom paragraph of the statistics we see “The annual core inflation rate eased to 3.5%, the lowest since October 2021” which tells us that some of the reason that the target was met was for reasons largely beyond the control of the policy makers. The test for them will be maintaining inflation at target, not achieving it the once.
Just look at their forecasts
They are sure it can be maintained at or near target – and targets are never hit precisely
So, what are you trying to say?
Definitely stay away from The Grauniad. It’s intellectually incoherent. Hasn’t got a clue how a fiat currency works!
Some do
Some don’t
The journalists do not follow a line
@Schofield –
All things considered, I like the Guardian/Observer.
I certainly have no desire to visit the Torygraph and can barely tolerate The Spectator’s political writers.
You didn’t mention Cost of Shelter is that not a big factor that is in the gift of the as you say “Out of Control” Bank of England?
I am not sure what you mean
Increased cost of housing????
Rental and mortgage costs are rising – the cost of access to housing
“You didn’t mention Cost of Shelter is that not a big factor that is in the gift of the as you say “Out of Control” Bank of England?”
The fast climb from almost 0% is one thing but we have ridiculously short fixed mortgages so the switches will face doubling or even trebling costs, landlords will either sell up or pass on costs in pushing up rents and in all cases it’s a lagging factor. As you say it is a bizarre way to control inflation.
Hope you get the gist of what I mean?
The media is devoid of info on this topic.
Furthermore, the BoE – is never, ever subject to qiuestioning. If it is independent of gov & given its actions have a big impact on the economy, I’m rather surprised we never see a BoE top banana subject to questioning. Why? What makes them so special? Even politicos are obliged to face the press & sometimes citizens. Why not central banksters.
Of course this is all rhetorical – the CBs rarely talk to the press or get interviewed becuase that would expose them and their (quasi-religious) beliefs to ridicule, they would be exposed for the blind, self-satified, over-paid imbeciles that they are.
Don’t they sometimes have to appear before one of the Commons’ committees?
Yes, but the grilling is usually gentle because they can always say the decision is theirs to make, not anyone else’s, and that comes with swagger
I wish you’d be a little more forthcoming, Mike, and say what you mean.
🙂
Yes Mike I agree, stop holding back and say what you really think.
Out of interest, what is your profession, Mike?
Most of the changes in the last six months, at least, have been predictable based on simple arithmetic. It was obvious the rate would fall in May, as we lost 0.7% from the annual calculation from May 2023 (I’m looking at CPIH by the way) – and there was almost no chance the monthly rate in May 2024 would be at that level or above. I am waiting for the August figures, when we will see the first rise – again, this will be due to a likely 0.3% or thereabouts in July 2024 and the loss of the deflation of 0.4% in July 2023. Two points worth consideration: (1) The housing component of CPIH rose 0.1% to an awful 6.7% last month and (2) the CPIH, if annualised on the basis of the last four months figures, is 5.5%.
But no one pays much attention to CPIH