Tag Archives: asset price inflation

Consumer price inflation still refuses to surge; here is why

The snow has melted and it’s time to make plans for the future again. And like every spring, those plans are likely to include what has become known as “reflation” — inflation increasing again to a level where it can eat away at the mountain of debt the world’s big economies have to deal with.

Will consumer price inflation, rather than inflation in asset prices like property and securities, finally take off? There have been two interesting points of view last week on this issue.

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The great Fed unwind could cause market turmoil

A recent working paper published by the International Monetary Fund looks at the impact of unconventional monetary policy on an open economy, taking Canada’s case as an example.

The paper’s main finding is that unconventional monetary policy by the Canadian central bank has had expansionary effects on the Canadian economy. Continue reading

Central banks have bad news for property investors

As the major central banks are slowly retreating from their policy of asset purchases, we will probably witness some of the side effects of this withdrawal.

Warren Buffett famously said that “Only when the tide goes out do you discover who’s been swimming naked.” The tide is going out only slowly, but we are beginning to see, at least in the UK, the damage the ultra loose monetary policy has done.

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Policymakers could have lifted inflation, if they wanted

Central banks are still worried about the danger of deflation, even though they have timidly started to lift interest rates. How else would they explain real negative rates almost everywhere in the developed economies?

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As Brexit bites, there is little the Bank of England can do

The Bank of England will publish its inflation report next Thursday, and this time it will get even more attention than usual.

Brexit is being felt in prices more and more now, with the cost of grocery bills jumping and prices for essentials going up. The phenomenon of “shrinkflation” is in full swing as well; many products are mysteriously losing weight, but maintain their price.

No matter how much it would like to help (or to meet its inflation target), the Bank of England cannot do anything to prevent prices from rising. In fact, to be more accurate, it could, but it will not. The central bank could raise interest rates, stopping the pound’s depreciation — but if it does this, the housing market would crash.

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As home prices hit record levels, negative equity looms

A statement from Halifax shares the “good” news: home prices paid by first-time buyers are the highest ever.

In the first half of this year, first-time buyers paid on average £207,693 for a home, the highest price on record. This is 4% higher than a year ago, and 50% higher than five years ago.

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Home price inflation keeps going, deepening inequality

The financial repression that central banks started after the global financial crisis of 2007-2009 does not seem to be close to an end. The central banks argue that inflation has not come back to their target of around 2%, but their definition of inflation is flawed.

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Young Britons must get involved in Brexit negotiations

A survey by Scottish Widows imparts some uplifting news: British millennials are optimistic about their future. Around 75% of millennial-aged Britons expect their quality of life to improve or at least remain the same in retirement, it shows.

Most millennials expect to retire around 63 years of age (Scottish Widows calls this “early” retirement, but until not long ago, retiring at 63 would have been considered pretty normal).

“This generation has expensive plans for their later years, with holidaying overseas (59%), trips to the cinema and theatre (48%), keeping up with the latest fashions and buying new clothes (28%) and eating and drinking out regularly (26%) in their sights,” the survey shows.

While it’s always good to see the young looking confidently to their future, they should take a better look at these plans and perhaps revise them down a bit, following the UK’s vote to leave the European Union. They should also perhaps learn from that vote and become more active and vocal in future political decisions.

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Correction of 50% for London house prices possible

As the effects of the vote by the UK people to leave the European Union still unfold, more and more economists say property will take a serious hit. A 50% cut in property prices in London is among the possibilities mentioned by one analyst.

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UK house prices will hurt the economy even if they keep rising

Another trick to keep UK house prices rising is taking center stage: the extra-large mortgage. It’s the mortgage lasting half a lifetime, or more, which allows you to buy a home even if, under normal circumstances, you would not afford it.

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