Dr Alf’s Two Cents: Consumer Price Inflation May 2013 – ONS

The Bank of England in Threadneedle Street, Lo...

The Bank of England in Threadneedle Street, London. Deutsch: Sitz der Bank von England in der Londoner Threadneedle Street. (Photo credit: Wikipedia)

Fiscal policy

Fiscal policy (Photo credit: Wikipedia)


The latest ONS report on consumer price inflation in the UK is INTERESTING READING. Check it out!

via Consumer Price Inflation, May 2013.

The most significant comment for me was:

The largest upward contributions to the change in the rate came from transport (notably air transport and motor fuels) and clothing.

It will be interesting to see whether the latest announcement will have any impact on the two important levers of economic policy, namely fiscal policy and monetary policy. I suspect that there will be little change to both. UK Chancellor, George Osborne is still locked in to his austerity policy, so no change in fiscal policy. Meanwhile, it is probably too early to expect any change in direction from the new leadership at the Bank of England as far as monetary policy is concerned.

Regular readers of this blog will know that I agree with the IMF‘s view that austerity in the UK has been too severe and the economy should be carefully reflated. In particular, I endorse the IMF’s recommendation to increase public borrowing by £10 billion this year and invest it in top-class infrastructure projects.

Any thoughts?


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4 responses

  1. Pingback: Unwinding the world’s biggest economic experiment – Gavyn Davies – FT.com « Dr Alf's Blog

  2. Pingback: The Evolving role of Fiscal Policy – IMF- YouTube « Dr Alf's Blog

  3. Alf,

    The statistics take some reading. The ONS has issued a complex analysis with various measures of inflation, each targeted at something different. Overall it seems that whatever the measure, prices are rising.

    This is seems counterintuitive to my personal experience. Over the long term (20 years or so) Food, clothing, dry groceries, technology and manufactured goods seem to me, to be far less expensive; whereas domestic power, water, vehicle fuel, public transport and taxation* all seem to be higher.

    My intuition suggests to me that the increases we are experiencing are primarily in the sectors where competition is either absent or regulated. What do you think? Is there any evidence to substantiate that thought?

    * I include taxation in the list because it is one of our biggest outgoings, but it is not included in any measure of inflation as far as I know.

    Have a great week.


    • Adam,

      Thanks for a very interesting response.

      I broadly agree with you.

      It is time to open up many of these sectors to more competition.

      I’m all for more economic liberalism. Of course, we require social services but social policies & their delivery have lost their way in recent decades. For me, radical change is required but that requires leadership.


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