Wednesday, May 19, 2010

UK Inflation - Can King be believed?

A 17 month high to 3.7% on the CPI and 5.3% on the RPI (the highest for 19 years) should not be a surprise, detail here. Again Mervyn King must write to the Chancellor of the Exchequer pleading the temporary nature of the rise......... but can he be believed? Actions speak louder than words, however, and I for one find it hard to believe the percentage increase in Bank of England pension fund investment in index linked 'Granny' Bonds, (read here) rising from 70.7% in 2008 to 88.2% in 2009, cannot have been accomplished without at least the tacit approval of the BoE Governor, after all it is his own pension at risk. When King writes "If the recovery continues as expected, that will gradually erode the slack in the economy, bringing inflation back to target" the big "If" seems to indicate that this will not be the case! Watch a video from the USA on hyperinflation called "Meltup" linked here.



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