April 22, 2007
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I’m sorry. Economics and interest rates again (though I would like to make the point that I’m not whining about the prospect of my mortgage payments going up; working for The Man means I can absorb anything they throw at me, and frankly my rate’s still better than fixed mortgages). I’m still confused. It’s pretty much a given that interest rates will rise again, after Mervyn ‘Merv’ King had to grovel to the Treasury after the CPI inflation figure went over 3%.
Now. Here are the things.
Inflation is, I learn this week, calculated by comparing what things cost this month with the same month the previous year. One of the things that’s pushed up prices recently is the supermarkets finally deciding to pay decent prices to dairy farmers; don’t even get me started on the evils of supermarket monopoly, but this would indicate to me that the price rise is artificial. It doesn’t imply a trend – the price of milk won’t continue to rise for the next six months. So I’m a little annoyed by the screaming headlines about dastardly inflation, especially when five out of ten financial institutions are actually predicting an initial rise in interest rates followed by a drop (in Saturday’s Money supplement in the Grauniad; doesn’t appear to be online) but what got reported? ABN Amro’s prediction of 6% by this time next year, completely out of step with the rest of the money men.
God, I hate the media.
I also keep reading that our Merv is concerned by "spiralling wage inflation" (© all the finance sections). But, right, looking at this from my point of view as the social historian… what’s the one thing that’s guaranteed to make people look for a higher wage? Increased mortgage repayments. So why the hell would putting up interest rates peg back wage inflation?
I’m trying to find some logic to economics, but it seems to be all numbers and very little common sense.