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Cheap talk and costly actions

Article Abstract:

United Kingdom wage inflation is increasing by 6.2% annually, which could indicate that inflation is a problem. Rising house prices also indicate concern about inflation, and the two factors could mean that interest rates may need to be raised. A rise of 0.5% to 8% may be needed in order to change inflationary expectations. Allowing the Bank of England to control interest rate policy was a move intended to curb inflationary expectations, but this has not occurred, so rates may have to be raised to reduce expectations.

Interest Rates, Economic policy

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UK inflation: in jeopardy

Article Abstract:

There is a danger that inflation could rise in the UK according to Tim Congdon from Gerrard and National. He argues that a growth in the money supply and strong asset prices could boost demand. Output could reached levels above historical averages by 1998 and inflation may be difficult to tackle by that stage. The UK Conservative party is more concerned with the short-term problem of winning an election than the need to curb the growth of money due to a risk of inflation in the medium term.

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Money talks - but only in a whisper

Article Abstract:

The United Kingdom money supply is increasing, measured in terms of M4 or broad money. Inflation is seen as linked to the money supply but it is uncertain whether M4 is the relevant definition of money. Changes in M4 have an impact on consumer spending but this tends to be only short term. Companies are more likely to carry out acquisitions and mergers when M4 increases and this means stock prices rise and capital is cheaper.

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