UK inflation rises to 1.5% in October

The Office for National Statistics has today announced that Consumer Price Inflation (CPI) rose for the first time in eight months to 1.5% in October from a 5-year low of 1.1% in September.

The rise was not unexpected after a sharp fall in transport costs last year was not repeated this year and because fuel prices had seen record falls this time last year.

The real question everyone will be asking is whether this is simply a technical rise, which will continue a few more months before falling back again – as the Bank of England believes – or whether this is a sign of inflation about to run out of control.

There are two main camps for the latter – one thinks we face deflation in the near term, while the other thinks we face hyper-inflation in the medium term. Both camps are not, however exclusive.

That means you can be sure inflation is going to be watched even more closely than ever, for warning signs of one or the other scenario playing out.

Sub prime problems!

UK sub-prime lender Cattles says there has been a failure of internal accounting controls at the firm and it is suspending three senior managers.
It said that it had uncovered problems in the ways it accounts for bad loans.

Gordon Ramsay’s kitchen nightmare!

Gordon Ramsay has been forced to promise to cover some of his restaurant group’s debts after it broke promises it made to its lenders.
Despite tripling profits to £3.05 million, the foul-mouthed chef’s restaurant group has been forced to renegotiate a multi-million pound loan with RBS after it breached its banking covenants.

£75 billion worth of asset purchases

The Bank of England’s Monetary Policy Committee today voted to reduce the official Bank Rate paid on commercial bank reserves by 0.5 percentage points to 0.5%, and to undertake a programme of asset purchases of £75 billion financed by the issuance of central bank reserves.
World activity continued to weaken, reflecting both depressed confidence and the persistent problems in international credit markets. In the United Kingdom, output dropped sharply in the fourth quarter of 2008. That reflected lower consumer spending, a further fall in business investment and a rapid run-down in stocks, in part offset by stronger net exports as the past depreciation of sterling began to take effect. Business surveys continue to point to a similar rate of contraction in the early part of this year. Unemployment has risen markedly. Credit conditions faced by companies and households remain tight.

How low can they go!?

The Bank of England is expected to cut interest rates to a fresh all-time low and start increasing the money supply in an attempt to revive the economy.
Most analysts believe the Bank will cut rates to 0.5% from 1%. An announcement is due at 1200 GMT.