Sky News business editor Michael Wilson

That official 3% inflation figure for April caught everyone by surprise – although families struggling with the huge rise in food and fuel costs would probably scoff at it.

Any more than 3% and it would be time for the Governor of the Bank of England to write his second mea culpa to the Chancellor, explaining why inflation has broken its one per cent limit over his two per cent target.

It’s as academic as it sounds. First we all know that our personal inflation levels, unless you’re buying flat screen televisions or i-pods, are far above the Bank of England ‘target’, and show no signs of easing.

We saw yesterday factory inflationary pressures rising at levels not seen for 20 years – those very bad old days of economic chaos which Gordon Brown often used to contrast with his own record of economic competence.

We also saw a thinly veiled warning that gas prices could rise anywhere between 20 and 30% by the winter.

Inflation is back with us – and since we now know that the interest rate setters who stayed put with their decision last week were in possession of this latest shock figure, no wonder we didn’t get a cut and we're almost certain not to get one next month, either.

So the bind which I’ve often noted before is now well and truly with us.

A slowing economy, with confidence in the housing market at rock bottom, desperately needs lower interest rates.

Rising inflation won’t allow that to happen. It’s an awful conundrum for us all.

We await tomorrow’s job figures with interest.

Comments

[Desmond Moore- ireland 22 May 2008 12:24:03]

I was pleased to hear that TESCO had a policy in these difficult finicial times of actively trying to keep a lid on prices to support their customers. I heard today from sky news business channel that oil prices were rising due to speculation. If people knew the companies that were doing this then it would be possible for people to boycot these companies. This would give power back to the people. If I knew that Esso for example was involved in this activity then I would get my petrol form some other company.

This could be done with other products where speculation was identified as the cause of rising prices.

Some organisation would have to introduce the concept to the public and determine on an ongoing basis those companies who were hiking up the prices.

Perhaps SKY woud like to take up this project.

[Trevor 15 May 2008 17:53:36]

I don't know how many times the obvious point has to be made, or why our head-in-the-clouds philosophers at the Bank just don't seem to 'get it' .... but, for a time at least, we can LIVE WITH virtually any single figure level of inflation - even 9%, given that 2% was always a transparent bloody lie anyway.

What we CANNOT live with is a housing market in the doldrums, a high and increasing level of unemployment, repossession of people's homes, people losing their jobs (14,000 of them now? That is 14,000 families facing absolute misery, and many of those will be the ones to lose their homes next. Yeah, I reckon they'll vote Labour again !)

If Brown ("Prudence" ? He's having a laugh!) had not been such a spendthrift and taxed the ass off everybody over the past 10 years, only to squander the money he seized, then we would be in a FAR better position to weather the current storm.

Funny how Brown has not recently repeated his claim "I have ended boom and bust". Does he now admit that he has NOT in fact done so? Or is it, like always, some other bugger's fault ?

[Ian dixon 14 May 2008 07:42:17]

THe US and UK economies have been run on a debt overdrive for too long - each time a crisis (read natural turning point) arrives, governments have intervened in the markets to prevent change - the argument being economic stability.
The UK needs to adjust its entire economy to reduce imports, increase exports and start living within its means.

In the Thatcher years the term 'competitiveness' was used - it has not been used for a long time.

The UK needs to turn away from consumption and supporting house price inflation - lose its unhealthy love affair with bricks and postcodes - and start competing in the real world.

to change BOE targets now - to focus on growth - would only cause high (possibly hyper) inflation - and failure to adjust

we actually need the truth and honour of a Thather to run this country!

[Ed, Basingstoke. 13 May 2008 17:23:46]

Dear PM Brown:
Want to win the next election? Just cut 50% off of fuel duty, and it's a landslide victory. There is absolutely no reason why this country has the highest fuel tax in the world when the price of a barrel of oil is sky rocketing daily. Britains economy is going down in flames and it seems you're still sitting in first class watching a movie about 1997, whilst the pilots have all bailed out. Time to grab the stick and regain control, otherwise you're staring at another 18 years in the cold and wet of opposition.

[Dennis, Cramlington Northumberland 13 May 2008 17:11:46]

Purps & peeps

Soon we will have the first (of many no doubt) staff made redundant by the famous Govt Mortgage Company in Keeganland, who will also, having put aside many £'000s from his or her quite meagre pay to buy Company shares to provide for retirement, have been turpin-ised and broke in cash and in spirit.

The fact that such a person will not be likely to find any alternative employment, and will not be able to repay his mortgage to the said Govt. Mortgage Company - especially as the interest rates have risen and house prices falling like a stone up here - will not help matters.

Of course when the Govt Mortgage Company, now very keen indeed to evict the very Customers (that their predecessors fought hard to attract and keep) at the drop of a hat, realise that this new Customer default exists we can expect a sudden rushing of bailiffs and the taxpayer being soothed with juicy repayments...

Of course firstly, the Govt will fulfill their very kind offer of letting the taxpayer paying the legal expenses of the victim to fight the nasty legal people of the (ahem.) Govt Mortgage Company - who themselves are paid for by the Govt Mortgage Company (i.e. the taxpayer).

And meanwhile, the real owners of the good business now being turned into bad - the little shareholders - will see their past profits going out of the window whilst trying to undertand the difference between a 'Collaterised Loan Obligation' and a 'Bottle of Milk' (worth about the same I should think, given inflation).

So, everyone gains.
Roll on unemployment benefit, no purchases of any goods in the shops, and negative equity.

Hope that Grainger bloke succeeds in his petition.

[purps, chelmsford 13 May 2008 15:54:16]

For Dennis
Dear all Northern borrowers out there in Geordie land >province of North Seaunless you have made a profit or die <

This method will also meet our new target of public housing for all. We did not get where we are today without fudging the targets and telling porkpies.

We will also create Islamic Golf courses for our gold star borrowers, renters who keep their property in tip- top condition.

The Treasury & Darling guaranteed to make a drama out of a crisis.

Roll on Friday at the Treasury, now where is that Mecca, is it St James Park.
The Purps

[Dennis, Cramlington Northumberland 13 May 2008 14:11:35]

The Bank of England’s insistence that assets are fundamentally mispriced will raise the question again of whether authorities should step in to buy up mortgage-backed securities themselves. The bank says that if investors do not reappraise risks and start buying again, there is a moderate risk of a much sharper slowdown.

Do they not feel that it is time they stopped slowing down the speed-up?

[Dennis, Cramlington Northumberland 13 May 2008 14:09:18]

Whatever job figures are announced tomorrow, there'll be another 2,000 or so added very shortly when the axe is wielded at the famous 'don't borrow from us - please' Government Mortgage Company in the North East.

And, as there are no longer any shareholders (the same having been dick-turpin-ised a while back) - I have to just wonder what relations the Company Shareholder Relations team are having with whom and why.

I think we should be told, Darlings

[Dennis, Cramlington Northumberland 13 May 2008 14:02:01]

Dear Gov. Purps
Thank you very much for your letter of earlier today and your kind comments.
It made a very interesting and compelling read over during my my bottled-water break, instead of the usual derogatory stuff I have to put up with from time to time, sent by friends by him who would be king, no doubt.

I am thrilled you are moving over to the Isle of Man - I have a friend out there, Douglas, who tells me their inflation is very low and people are also very content with their lot, very much like here! It is a shame, though, they only have no women on the island, which rather worries me about how their economy is going to survive in the long term if there are no children other than those to be imported from Eastern Europe, as you say!

Well must rush, sorry I have to do something about that bloke in the North East who is going round the place getting thousands of pensioners to sign his petition about being ripped off in their compensation for the Northern Cock Rock-up.

Dennis somebody, I think he's called, but not sure. I have a problem with my memeory actually, but, I have forgotten what it is.
Sorry!

Hey Ho
On we go
All the best Purps
Darling

ps I play the Golf game quite well, actually, but often the little white ball - actually sometimes it is yellow - keeps landing on the 'pay income tax' square, which I find is the most fun.

[Khalid 13 May 2008 13:44:43]

Sir
As inflation has risen to levels perceived to be uncomfortable, the grace and honour of the BoE has been sustained, suffice to say, had the rate of interest been cut, Darling would have passed the buck onto the dough makers themselves.
Notwithstanding the fact that DWP, NHS, FO, OFT amongst others take more than their fair share of taxpayer funding, and not in the least forgetting the rising expense claims of many a political head.
The sad part of all is that today we have a governemnt that cares not about its own naturals, whilst providing a policy doctrine not too dissimilar to that of the Burmese authorities.
Fiscal prudence given to the likes of the FSA and the many an ombudsman further adding to the expense and concern that are we really a nation that cannot get to grips with the ethics of law and control the Gas, Electric and Water markets or are we more concerned about [Shirley Bassey] and her [Goldfinger].
Thus far as tomorrows job figures, I would'nt wait too long as neither I leave anything for the next day, nor do I believe the cosmetic figures these lot appear to pluck out of thin air as history has provided.
Did someone mention golf? Lets Go! F.A>B>>>>>>>

[Michael Cornwall 13 May 2008 12:17:21]

And here's the good news.I just been offered a parcel from the wholesaler, 3 items together greatly discounted ,but I have to buy 10 lots. Not been offered it before. Bakers dozens ,buy 12 get 1 free are fairly normal.
Er, I am not sure is it good news?

[purps, chelmsford 13 May 2008 12:13:29]

Governor Kings Inflation Letter to Alistair Darling.

Dear Alistair,
C.C. Gordon

As I mentioned to you when you messed up the Northern Rock debacle and when brown the schizophrenic PM gave away the Bank of England’s power to the dickheads at the FSA, who frankly could not run a whelk stall, let alone regulate the world’s financial markets in London. Inflation is hotting up, while Labour is cooling.

Now that you have taxed everyone to oblivion, even the poor, and while I understand the need to raise Tax to pay for all Blair’s wars. Quite frankly, we are now so heavily Taxed, the board of the Bank have advised me to inform you that we are moving the Bank of England to the Isle of Man and opening a branch in Frankfurt, so we can get cheap funding from the German ECB.

We have sold the Bank’s building, to the Hilton group, who will turn it into a smart hotel, this measure has raised more money than your Gold sales, which we advised your boss not to do. The building was empty anyway as we had run out of Gold in the vaults and the printers were all out of fivers. We had been anyway renting the strong rooms out to the City of London Police to house their clients, the millions of East European criminals and African terrorists.

By the way, unless you start making cuts in the civil service, and sack the consultants and slash NHS spending to 70 billions, using the money for Tax breaks, we will be bankrupt as a nation.

WELCOME TO STAGFLATION

I have to advise you due to Browns mistakes the economy is shiate growing at 1.4% this year and going into recession next year, the inflation rate is 3.1%, but as we all know with statistics, we fiddle them for political reasons, the real rate is 15%

Look forward to seeing you and Gordon on the Golf course, when you both get kicked out of office for being useless.
The Gov
Purps