Turning points

[Boomer54]

I note with great interest that CPI has now dropped to 4.6%. That is literally half of what it was and it is actually below the halfway target of 5% Rishi Sunak was talking about earlier this year. Just has importantly it is now below aggregate wage rises which means people are getting real inflation adjusted increases in income. This will be interpreted (as long as it is not a blip) as being impetus for the BOE to look for a rate cut perhaps sooner than previously expected.

For income seekers it will signal a decent turning point where many income generating Investment Trusts etc will start to attract interest having been viciously discounted in the swing towards Bonds. Some real bargains out there now, but you don't even need to jump right now. Let others take the initial gains and risk and follow when it's slightly more transparent.

For cars and other assets any drop in the cost of finance can only be supportive to values by way of reigniting some extra demand. Not here yet ,but more than likely it's on it's way.

[stepheneric]

8 hours ago, Boomer54 said:

CPI has now dropped to 4.6%

The BOE is tasked with keeping interest around 2% - but they permitted it to go well into double figures - so to be bragging it  is now over double

the accepted rate is pathetic.

Moan over!!!!

 

[Boomer54]

13 minutes ago, stepheneric said:

The BOE is tasked with keeping interest around 2% - but they permitted it to go well into double figures - so to be bragging it  is now over double

the accepted rate is pathetic.

Moan over!!!!

 

I understand your angst. However, fyi they have dual remits none of which is tasked to maintain rates around 2%. Not sure where you got that misinformation from.

I suspect you are talking about the remit to aggregate inflation targets around 2%. On that score they have been absolutely abysmal. In the private sector they would have been out of a job years ago.

My earlier comments were factual as opposed to 'brags'. The fact being that inflation has indeed fallen below half it's peak rate. Most of that has little to do with BOE rate management and more to do with external factors and the way inflation is measured. Nonetheless it remains a factual descriptor of the current economic enviroment that price increases have in general peaked and wage increases are playing catchup. The conclusion from that is we can look forward to lower financing costs sooner than previously expected.

[scudney]

Fingers crossed 🤞 lol 

[Boomer54]

8 minutes ago, scudney said:

Fingers crossed 🤞 lol 

Nope, fix is in. Promised Bailey one of Malc's LS400 for each 50 bps reduction he makes.

[Linas.P]

This is just monthly inflation figure, it is kind of flawed to compare last month YoY inflation drop against target of quarterly inflation halving.

As well it is easy to achieve lower inflation after already record inflation last year. That is why I think it would be more meaningful to wait until full year figure and compare full year 2022 vs. full year 2023.

It kind of becomes matter of perception - 4.6% inflation would be bad, but compared to 11.1% at the same period last year it looks almost like a good thing, but this inflation is compounding...

I know I am explaining basics here, but they are relevant when it comes to "real wage growth" and affordability. For somebody that was earning £40,000 last year their real wage continues to drop, slower than last year, but it is still dropping.

And besides this 4.6% is just headline figure averaged across many factors, food for example is still on 10.1% some areas even higher. So my view is that we are still far away from being out of this mess and I am not expecting deflation at any time soon, like for example fuel prices dropping maybe back down to at least ~£1.20 range which would have drastic effect on all good and everything. 

[Jgtcracer]

29 minutes ago, Linas.P said:

like for example fuel prices dropping maybe back down to at least ~£1.20 range which would have drastic effect on all good and everything

Do we expect that is ever going to happen??

 Not so sure myself……

[Linas.P]

Unlikely...

I mean it is possible and government that cared to revive economy could easily take such step, I would argue it would be popular decision, 50% of fuel cost right now is tax (historically low as well, because duty is static, so with higher price it has less impact, it was 71% in 2020). So if fuel is currently £1.54 at pump, it is completely in governments power to make it £1.10 overnight there there still would be 35p of tax left. 

It is impossible to know why they not doing it, obviously we can speculate and make conspiracy theories... but not more than that. 

Going back to inflation, I think what is more important is that annual Core inflation is only down 0.3% from 5.9% to 5.6% and this is more telling. The headline figure that includes energy and food prices is generally from external factors (like war in Ukraine) that government can't do anything about, so they now boasting to have "resolved" the inflation they never had any control of, but the core inflation which they could do something about they have not reduced at all. Politics!

[Boomer54]

50 minutes ago, Linas.P said:

This is just monthly inflation figure, it is kind of flawed to compare last month YoY inflation drop against target of quarterly inflation halving.

As well it is easy to achieve lower inflation after already record inflation last year. That is why I think it would be more meaningful to wait until full year figure and compare full year 2022 vs. full year 2023.

It kind of becomes matter of perception - 4.6% inflation would be bad, but compared to 11.1% at the same period last year it looks almost like a good thing, but this inflation is compounding...

I know I am explaining basics here, but they are relevant when it comes to "real wage growth" and affordability. For somebody that was earning £40,000 last year their real wage continues to drop, slower than last year, but it is still dropping.

And besides this 4.6% is just headline figure averaged across many factors, food for example is still on 10.1% some areas even higher. So my view is that we are still far away from being out of this mess and I am not expecting deflation at any time soon, like for example fuel prices dropping maybe back down to at least ~£1.20 range which would have drastic effect on all good and everything. 

I can and will address each point if you wish, or you can trust that much of what you are saying is pretty much the same mistaken viewpoints that many people make when they are discussing inflation. No criticism intended there it's common enough.

[Boomer54]

19 minutes ago, Jgtcracer said:

Do we expect that is ever going to happen??

 Not so sure myself……

All I can tell you is this is the viewpoint being taken in the Bond markets and frankly it is they that 'run' the world , and not as some people think mere govts ,or indeed equity markets. The latter are crumbs on the floor at the bread factory compared to Bond markets. The reality of that is exactly what Truss and her Chancellor ran face first into last year.

[Linas.P]

54 minutes ago, Boomer54 said:

I can and will address each point if you wish, or you can trust that much of what you are saying is pretty much the same mistaken viewpoints that many people make when they are discussing inflation. No criticism intended there it's common enough.

Please enlighten me - you know I will always stay for long conversation! 

[stepheneric]

14 hours ago, Boomer54 said:

tasked to maintain rates around 2%

Sorry my mistake - I should have referenced Inflation at 2% not Interest rates

[Boomer54]

14 hours ago, Linas.P said:

Please enlighten me - you know I will always stay for long conversation! 

Been out all day. I will prepare your reading list and get back to you with it later. Then we can discuss your post above on a point by point basis. If you can take the time to ask for a discussion then I will the time to prepare it.

[Linas.P]

Don't bother with list of reading, I am not reading type... just let me know where you think I am wrong and we can discuss. You know I will never miss opportunity for that!

[Bluemarlin]

15 hours ago, Linas.P said:

Unlikely...

I mean it is possible and government that cared to revive economy could easily take such step, I would argue it would be popular decision, 50% of fuel cost right now is tax (historically low as well, because duty is static, so with higher price it has less impact, it was 71% in 2020). So if fuel is currently £1.54 at pump, it is completely in governments power to make it £1.10 overnight there there still would be 35p of tax left.

Sure, it's in government's power to reduce the tax on fuel, but that carries the knock on effects of reduced tax revenues. The real issue is OPEC deliberately limiting oil production to maintain higher prices.

[Bluemarlin]

18 hours ago, Boomer54 said:

The conclusion from that is we can look forward to lower financing costs sooner than previously expected.

You might be right, but then that makes me wonder why Nationwide have just sent me a letter offering 8% interest on a new savings account.

[Linas.P]

8 minutes ago, Bluemarlin said:

Sure, it's in government's power to reduce the tax on fuel, but that carries the knock on effects of reduced tax revenues. The real issue is OPEC deliberately limiting oil production to maintain higher prices.

That I know - that is why I said headline inflation is not in government power to control, so for them to claim they have "defeated the inflation" is kind of silly, because the current drop we seeing is all external factors!

That said reduction or increase in fuel tax/duties is purely political issue... fuel cost is one of the underlying factors in inflation, if fuel price increases then all the prices increase, so cutting fuel price would reduce inflation on food and many other items that are required day to day and therefore would reduce the inflation widely. On top of that fuel related taxes are currently at only 2% of government revenue, so cutting it in half and making fuel price say £1.10/L would have negligible effect on tax revenues and I would argue profound effect on kickstarting economy. BUT... they won't do it because they are in perpetual war against motorists, they want to give impression that they are punishing motorists because all sorts of vegetables in lycra are getting satisfaction from it. If government would cut fuel duties it will be all over the place across Guardians an a likes... "how our government is destroying our future", further it would kind of undermine their agenda of "war on cars"... it would send really confusing message... "on one hand we want to ban ICE, on other hand we just removed the fuel duty"... So do you want us to drive or you don't?!

I personally would support complete end of fuel duty in principle as I consider it inherently unfair and double taxation, so not only we pay VAT, but we as well pay duty on top and then VAT for duty! That is tax on tax which is then taxed! What?! And that is before considering that we already pay road tax, so tax on double tax which is then itself taxed! How many times same thing can be taxed?

[Malc1]

Nationwide 👍👍👍 THE bank of and for the People 

I rate them very highly and actually honest and trustworthy ……. wouldn’t be without them …… the rest are well, just the laggards in modern day “ for the people” banking imho 

There are of course some banks to simply avoid for all sorts of reasons ……. and some that, quite rightly, avoid some dreadful customers too …… indeed Big Bro might be watching YOU …… take care 😂

AND the lower inflation rates are to be commended …… it’s often the currency exchange rates that cause ( me ) some consternation …… and of course the thievery going on with E5 petrol prices for those of us having to run older but  “ Green “ cars 

The petrol thievery not necessarily with Govt taxes but by the vendor supermarkets mainly taking the pi-s from US the captive audience 

Get those hard prices under control and we might all feel a little less ripped-off and our “ inflation “ in our pockets ameliorated 

Anyway ….. Nationwide is good to its customers 👍👌👏

Malc 

[Boomer54]

1 hour ago, Bluemarlin said:

You might be right, but then that makes me wonder why Nationwide have just sent me a letter offering 8% interest on a new savings account.

Let us be very specific. That will be what is termed a regular savings account that will come with a strict limit on what you can save each month. In essence though each monthly saving will accrue interest at 8%pa the fact is at the end of 12 mths the aggregated annualised rate on your capital will be approx half the 8%pa headline rate, because the capital is drip feeding in.

For example if you could take your monthly deposits and front load that into a 1 Yr fixed bond at 5%pa you would actually make more interest from that than you would the 8% regular saver.

This is an issue many people are fooled by. All they see is the headline rate!

[Bluemarlin]

50 minutes ago, Linas.P said:

I personally would support complete end of fuel duty in principle as I consider it inherently unfair and double taxation, so not only we pay VAT, but we as well pay duty on top and then VAT for duty! That is tax on tax which is then taxed! What?! And that is before considering that we already pay road tax, so tax on double tax which is then itself taxed! How many times same thing can be taxed?

At least once more, when you add on congestion charging 😉

[Malc1]

22 minutes ago, Boomer54 said:

Let us be very specific. That will be what is termed a regular savings account that will come with a strict limit on what you can save each month. In essence though each monthly saving will accrue interest at 8%pa the fact is at the end of 12 mths the aggregated annualised rate on your capital will be approx half the 8%pa headline rate, because the capital is drip feeding in.

For example if you could take your monthly deposits and front load that into a 1 Yr fixed bond at 5%pa you would actually make more interest from that than you would the 8% regular saver.

This is an issue many people are fooled by. All they see is the headline rate!

You’re quite correct and I too have decided to plough my surplus monthly max £200 into this Savers Fund ……. I’ll be rich beyond the pale ( or pail 😂) when it matures ……. Enough to buy another Ls400 👍

Malc 

[Boomer54]

3 minutes ago, Malc1 said:

You’re quite correct and I too have decided to plough my surplus monthly max £200 into this Savers Fund ……. I’ll be rich beyond the pale ( or pail 😂) when it matures ……. Enough to buy another Ls400 👍

Malc 

I think you will be pale before rich !

[Malc1]

3 minutes ago, Boomer54 said:

I think you will be pale before rich !

Richness is in the eye of the beholder 😄  …… the wealth of a bevy of Ls400s must suffice 

Malc 

[Linas.P]

40 minutes ago, Bluemarlin said:

At least once more, when you add on congestion charging 😉

You are right... indeed forgot about that! At least they don't charge VAT on top of ULEZ! 

[Boomer54]

48 minutes ago, Malc1 said:

Richness is in the eye of the beholder 😄  …… the wealth of a bevy of Ls400s must suffice 

Malc 

No mate, it is definitely in the bank accounts and portfolio. 😉

I have had the 'eye of the beholder' and it never paid for any of the goodies I like to have.