"If today's projections are right this will be the longest lasting recession for a century"
"Thankfully the MPC did the right thing and kept rates on hold, in contrast to the ECB which raised rates to 1.5 per cent. There is no evidence in either the UK or the Euro area of a wage price spiral emerging, and inflation is set to fall in the Euro area as the effects of the recent oil and commodity price increases drop out. Therefore, the ECB's move looks to be a classic policy error as this will exacerbate the growth problems experienced by all countries.
As background I looked at the latest data from Eurostat and plotted data on wages, inflation and changes in producer prices which are presented below. What stands out is that there is no evidence of substantial increases in nominal hourly wage costs in any country; the highest increase is a paltry 3.8 per cent in France. Greece has seen a fall of 6.8 per cent. For the Euro area the average is 2.6 per cent and 2.1 per cent in the UK. The story is similar on inflation, which did not increase at all in the Euro area over the last month and actually fell in five countries including Germany. Producer prices fell by 0.2 per cent in the Euro area and in nine of the 17 Euro area countries. What inflation? The ECB has made a major policy error as they did in July 2008 when they raised rates. This move to raise rates is madness as it will lower growth in the Euro area. Well done MPC"..............READ MORE
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