UK consumer inflation perceptions at new high
Simon Ward
Post a Comment
Today’s downbeat December sales figures from the British Retail Consortium confirm the slowdown in retail spending predicted by our leading indicator – see here. The indicator has weakened further over the last month, reflecting falls in mortgage approvals and consumer buying intentions.
Despite a gathering consumer slowdown, I still think the MPC should and probably will leave rates unchanged this Thursday. As recent US experience has demonstrated, easing policy before inflation expectations moderate is liable to boost price pressures while proving ineffective in stimulating the economy. Consumer inflation perceptions rose to a new post-MPC-inception high in December (before Npower’s recent announcement of 17% and 13% hikes in gas and electricity tariffs) – see chart. Statistical analysis confirms that the MPC takes consumer and business inflation expectations into account in setting rates and it would be a surprise if they ignored this deterioration.
View Printer Friendly Version
Email Article to Friend
Reader Comments