US and UK inflation

Latest data on inflation suggests price rises are dampening in the US - opening the door for further rate cuts.

But in the UK there are fears that sustained inflationary pressures will prevent the Monetary Policy Committee of the Bank of England reducing the base rate until at least the summer. Geoff looked at this in detail earlier in the week.

This shows the importance of inflation expectations in influencing the actual rate of inflation.

In the US, the Fed is worried about that a slump in the property market and a global credit crunch is pushing the economy into recession. Recent reports have shown that US house prices have been falling, and job creation has turned negative.

Energy prices appeared to fall in the USA, although some commentators are describing this data as ‘fluky’.

In the UK, on the other hand, higher prices in supermarkets and on fuel bills are in danger of fuelling higher pay demands.

The MPC fears that recent steep increases in food and fuel prices will lead individuals and companies to expect higher inflation and that this will stoke up wage demands and encourage companies to raise prices, making this strengthening in inflationary pressure a self-fulfilling prophecy.

Those anxieties will be aggravated by the poll findings, which showed that the average expectation of inflation in a year’s time among households jumped to 3.3 per cent in February from 3 per cent in November. It was the highest figure since the quarterly survey started in 1999. Our chart below shows another inflation worry - the rising prices of goods as they leave the factor gate - measured by producer price inflation.

Unit 2 Macro: Evaluation on Supply-Side Policies [21 May 2012]
Unit 2 Macro: Migration and the UK Economy [20 May 2012]
Unit 2 Macro: Measuring Inflation in the UK [20 May 2012]
Unit 2 Macro: Real Interest Rates [20 May 2012]
Q&A: What do we need to know about output gaps? [20 May 2012]
Unit 2 Macro: The Output Gap [20 May 2012]
Revision notes on unemployment [20 May 2012]
Unit 2 Macro: Bank Cuts UK growth Forecast for 2012 [16 May 2012]
Unit 2 Macro: Revision Notes on Supply-side Policies [10 May 2012]
Unit 2 Macro: Model answer for revision data question [9 May 2012]
Unit 3 Micro: The Dawn of a Shareholder Spring? [8 May 2012]
Unit 4 Macro: TV Assembly Back in the USA [5 May 2012]
Unit 2 Macro: Monetary Policy and Inflation Glossary [5 May 2012]
Unit 2 Macro: Economic Cycle Glossary [5 May 2012]
Unit 2 Macro: Aggregate Demand Glossary [5 May 2012]
Macro Revision - Key Statistics on the UK Economy [4 May 2012]
Macro Revision: Putting Things in Context [29 Apr 2012]
Unit 2 Macro: Inflation and the Business Environment [6 Apr 2012]
Unit 2 Macro: Revision on Real Economic Data [2 Apr 2012]
Unit 2 Macro: Revision on Real Disposable Income [2 Apr 2012]
Posen on slower growth in the UK compared to the USA [30 Mar 2012]
Life in the Slow Lane - UK Growth in 2011 Lags the Euro Area [28 Mar 2012]
George Buckley at the Millfield Economics Society [28 Mar 2012]
Beyond the Bike - Monetary Policy in Africa [28 Mar 2012]
Unit 4 Macro: Evaluating 3 Years of Quantitative Easing [27 Mar 2012]
Solar Panels and Tariffs [21 Mar 2012]
Unit 4 Macro: Video Resources on the Euro Crisis [10 Mar 2012]
Evidence of the dangers of protectionism [9 Mar 2012]
Unit 2 Macro: Policies to Drive Economic Recovery [9 Mar 2012]
Unit 2 Macro: Might Oil Prices Bring another Recession? [4 Mar 2012]
Economies hooked on central bank stimulants? [4 Mar 2012]
Unit 1 Economics: Panorama - Poor America [17 Feb 2012]
Unit 4 Macro: King on the UK Economy [15 Feb 2012]
Unit 2 Macro: Signs of Progress for Zimbabwe [29 Jan 2012]
Unit 2 Macro: Focus on China - Inflation [26 Jan 2012]
Inflation - what’s up, what’s down and what’s going to happen next [17 Jan 2012]
Unit 4 Macro: UK Bond Yields Reach Record Lows [11 Jan 2012]
Unit 2 Macro: Factors Driving Business Investment [10 Jan 2012]
Hopes and Fears 2012 [10 Jan 2012]
Unit 2 Macro: Quantitative Easing in the UK [8 Jan 2012]
Unit 2 Macro: A Jobs Boost for the US Economy [8 Jan 2012]
Unit 4 Macro: Exchange Rate Economics - Where next for the US Dollar? [31 Dec 2011]
2011 in Review - The US Economy [27 Dec 2011]
Rising prices and falling real incomes [13 Dec 2011]
Beyond the Bike - The Value of Money [19 Nov 2011]
Unit 4 Macro: America’s hour-glass economy [9 Nov 2011]
US Budget Visualised [7 Nov 2011]
Australia lowers interest rate to 4.5% [1 Nov 2011]
Can the “invisible hand” solve Africa’s poverty? [13 Oct 2011]
Unit 4 Macro: Unit Labour Costs and Inflation [12 Oct 2011]
Unit 4 Macro: UK Inflation Charts [12 Oct 2011]
The Return of Protectionism? [12 Oct 2011]
Why Is Macroeconomics Such A Mess? [11 Oct 2011]
University Challenged [11 Oct 2011]
Unit 2 Macro: Homework Assignment on Consumer Spending [3 Oct 2011]
Unit 1 Micro: Exercise on Market Supply [26 Sep 2011]
Unit 4 Macro: IMF Flags up Risks of Double Dip [20 Sep 2011]
Inflation in India [18 Sep 2011]
Unit 2 Macro: Interest Rates and Income Inequality [16 Sep 2011]
Study Note - Macroeconomic policy objectives [16 Sep 2011]
Mixing with the Nobel Economists [4 Sep 2011]
John Kay on the future of Economics [26 Aug 2011]
Monetary Policy Roundtable [25 Jul 2011]
Unit 4 Macro: Dangers of High Inflation [11 Jul 2011]
A2 Macro: Consumer Spending [30 May 2011]
AS Macro Key Term: Supply-Side Policies [25 May 2011]
AQA Macro: Remember to revise inflation [25 May 2011]
AS Macro Key Term: Demand Pull Inflation [24 May 2011]
AS Macro Key Term: Deflation [24 May 2011]
AS Macro Key Term: Cost Push Inflation [24 May 2011]
AS Macro Key Term: Inflation [24 May 2011]
A2 Micro: The Importance of Profit [19 May 2011]
UK Economy Update: What Mervyn Said [11 May 2011]
Review of “Adapt” by Tim Harford [9 May 2011]
Interest Rates Held at 0.5% once again [5 May 2011]
Macroeconomics revision - measuring Consumer Confidence [4 May 2011]
AS Micro: Rising Global Food Prices [2 May 2011]
Video Clips on the Chinese Economy [1 May 2011]
AS and A2 Macro Revision: Keynesian Economics [28 Apr 2011]
UK Economy at a Glance April 2011 [17 Apr 2011]
China set to become exporter of inflation [14 Apr 2011]
A2 Macro: Back to Roubini - a Year On! [11 Apr 2011]
AS Macro Key Term: Real Disposable Income [11 Apr 2011]
Unit 3 Micro: Solar Panels and Economies of Scale [11 Apr 2011]
AS Macro Key Term: Monetary Policy Tightening [11 Apr 2011]
UK Minimum Wage rises by 2.5% in October 2011 [8 Apr 2011]
ECB breaks rank and raises interest rates [7 Apr 2011]
AS Macro Key Term: Fiscal Austerity [6 Apr 2011]
AS Macro Key Term: Aggregate Supply Shock [6 Apr 2011]
AS Macro Key Term: Inflationary Pressure [5 Apr 2011]
AS Macro Key Term: Relative deflation [2 Apr 2011]
Timetric: Unemployment in the US Economy [1 Apr 2011]
OCR F585 June 2011: Data Charts [30 Mar 2011]
Keeping Track of UK Macro Objectives [18 Mar 2011]
Focus on Spain [16 Mar 2011]
Timetric: Unemployment Rates for Selected Countries [12 Mar 2011]
AS Macro Revision: Investment Spending [12 Mar 2011]
Dambisa Moyo - How the West was Lost [11 Mar 2011]
the latest data from the MPC [8 Mar 2011]
The minimum wage - summed up in one cartoon! [8 Mar 2011]

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