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Oil price inflation is now zero - CPI to fall

8th October 2008 | back to article listings BACK    print this article PRINT

The oil price has fallen so far to the mid $80s today that oil price inflation is now zero over the last twelve months. Nice to see and there are few things that can hold inflation up now so expect CPI to fall fast over the next few months giving the MPC all the data it needs to drop rates a lot further - more on this below.

So super low base rates will be coming soon to stoke up the economy again with little risk of inflationary effects, especially with wage rises going to get reported over coming months and record lows - the Spring wage bargaining season next year will see poor rental growth for a period after a great rental growth spurt. Landlords will need to watch their tenants carefully as they run out of money in the near term - landlord rent insurance is now a very much recommended option.

The Bank of England MPC committee has been very foolish over the last six months - living off a false reputation for good economic management during the very stable, low inflation and good growth period for the last decade. Since they were handed the sole control of base rates (until this week when they were told what to do, but that is an official secret) they have not had to do much to maintain stability but since late last year events required leadership and that has just not been forthcoming - the known facts, and published by the BOE themselves, is that interest rates affect inflation around 2 years ahead - so why are they waiting for monthly inflation figures to make decisions (other than this weeks overdue, obvious and yet panic measure) - because they have no idea of what the future holds, and if they do know then they are scared of acting in advance in case they get called to account for themselves. The BOE is clearly trying to manage inflation on a month to month basis, not two years ahead and this will be costly and unstable going forwards if it continues.

Mervyn King should resign once the current fuss is over as he is not the leader we need in this new economic period - the country needs a lion, not a mouse, as the Governor of the Bank of England.

This news story has come from the property investment blog by Stuart Law, CEO Assetz plc.

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