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Economics Nerd Central/ The Global Inflation Thread
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<blockquote data-quote="How bad boy" data-source="post: 7183945" data-attributes="member: 3028"><p>Bank of England raising rates to 4% today, UK house prices down for a 5th month in a row:</p><p>[URL unfurl="true"]https://www.bbc.co.uk/news/business-64471258[/URL]</p><p></p><p></p><p>It looks to me like underlying inflation is getting back under control in the US, core inflation is dropping there, but I wouldn't rule out further rate rises.</p><p></p><p>Inflation is absolutely hammering the UK, I think it's being exacerbated by Brexit effects, but should calm down this year. The pound is up over 10% since the Truss clusterfuck, which will help, as will reduced input energy costs, but due to the fucking idiotic structures the UK has put in place for energy markets, consumer energy prices probably won't start to decline until about June. Unless they actually change those structures. </p><p></p><p>Eurozone core inflation is dropping fast, 8.5% down from 9.2%, and because storage levels are still very good, still at ~80%, it's likely the worst has past for energy driven inflation, unless Feb/Mar are very, very cold.</p><p>That said, ECB rates are still low, would expect another few rate hikes.</p><p></p><p></p><p>*In my opinion, this is indeed fucking stupid: <a href="https://www.ofgem.gov.uk/publications/market-stabilisation-charge-dashboard#:~:text=The%20Market%20Stabilisation%20Charge%20(MSC,wholesale%20price%20cap%20index1" target="_blank">https://www.ofgem.gov.uk/publications/market-stabilisation-charge-dashboard#:~:text=The Market Stabilisation Charge (MSC,wholesale price cap index1</a>.</p><p>"The Market Stabilisation Charge (MSC) temporarily requires all domestic suppliers acquiring a domestic customer to pay a charge to the losing supplier, when wholesale prices fall considerably below the relevant wholesale price cap index</p><p>...</p><p>As of 23 May 2022 the MSC will be initially triggered when the wholesale cost falls more than 10% lower than the wholesale cost element of the price cap. The MSC also includes a derating factor, currently set at 85%. This de-rating factor determines the proportion of nominal hedging losses beyond the trigger point that will be covered by the MSC"</p><p></p><p>Basically, if the wholesale price falls and companies want to use that opportunity to start reducing prices to customers, they have to pay 85% of the difference to the company losing the customer, effectively killing off any reason for competing.</p><p>In belated, unrelated news, Centrica reported an 8x increase in earnings a few weeks ago, has brought back its dividend and is engaging in a quarter billion pound share buyback. <a href="https://www.theguardian.com/business/2023/jan/12/british-gas-owner-forecasts-eightfold-rise-in-earnings-amid-soaring-gas-prices" target="_blank">https://www.theguardian.com/business/2023/jan/12/british-gas-owner-forecasts-eightfold-rise-in-earnings-amid-soaring-gas-prices</a></p><p>Which is nice.</p></blockquote><p></p>
[QUOTE="How bad boy, post: 7183945, member: 3028"] Bank of England raising rates to 4% today, UK house prices down for a 5th month in a row: [URL unfurl="true"]https://www.bbc.co.uk/news/business-64471258[/URL] It looks to me like underlying inflation is getting back under control in the US, core inflation is dropping there, but I wouldn't rule out further rate rises. Inflation is absolutely hammering the UK, I think it's being exacerbated by Brexit effects, but should calm down this year. The pound is up over 10% since the Truss clusterfuck, which will help, as will reduced input energy costs, but due to the fucking idiotic structures the UK has put in place for energy markets, consumer energy prices probably won't start to decline until about June. Unless they actually change those structures. Eurozone core inflation is dropping fast, 8.5% down from 9.2%, and because storage levels are still very good, still at ~80%, it's likely the worst has past for energy driven inflation, unless Feb/Mar are very, very cold. That said, ECB rates are still low, would expect another few rate hikes. *In my opinion, this is indeed fucking stupid: [URL]https://www.ofgem.gov.uk/publications/market-stabilisation-charge-dashboard#:~:text=The%20Market%20Stabilisation%20Charge%20(MSC,wholesale%20price%20cap%20index1[/URL]. "The Market Stabilisation Charge (MSC) temporarily requires all domestic suppliers acquiring a domestic customer to pay a charge to the losing supplier, when wholesale prices fall considerably below the relevant wholesale price cap index ... As of 23 May 2022 the MSC will be initially triggered when the wholesale cost falls more than 10% lower than the wholesale cost element of the price cap. The MSC also includes a derating factor, currently set at 85%. This de-rating factor determines the proportion of nominal hedging losses beyond the trigger point that will be covered by the MSC" Basically, if the wholesale price falls and companies want to use that opportunity to start reducing prices to customers, they have to pay 85% of the difference to the company losing the customer, effectively killing off any reason for competing. In belated, unrelated news, Centrica reported an 8x increase in earnings a few weeks ago, has brought back its dividend and is engaging in a quarter billion pound share buyback. [URL]https://www.theguardian.com/business/2023/jan/12/british-gas-owner-forecasts-eightfold-rise-in-earnings-amid-soaring-gas-prices[/URL] Which is nice. [/QUOTE]
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