Inflation is on the rise

whiteonion

Inflation is on the rise in Ireland and this is a development that worries me.
http://www.brecorder.com/news/latest/18023:irish-inflation-up-sharply-in-december.html

Minimum wage has been cut and I also have noticed that in other jobs as well the wages have dropped.

What are people going to do when the wages are going down and the costs of living are going up?

Interest rates need to go up very high to combat inflation, too bad Ireland does not have an independent central bank.

ei.sdraob

latest CSO report here

as has become the norm now, sectors controlled or run by the state continue to inflate

whiteonion

ei.sdraob wrote: »

latest CSO report here

as has become the norm now, sectors controlled or run by the state continue to inflate

They say food prices have fallen, that is not something I have noticed! I shop at Lidl and I think many things have become more expensive in 2010 than it was in 2009.

MrMatisse

Id like to know whats driving it, assume the public sector

liammur

MrMatisse wrote: »

Id like to know whats driving it, assume the public sector

Fuel prices is having a huge impact, along with rising interest rates and Govt services.

amacca

whiteonion wrote: »

They say food prices have fallen, that is not something I have noticed! I shop at Lidl and I think many things have become more expensive in 2010 than it was in 2009.

I agree with you

and

things are going to get worse...interest rates will rise, fuel prices will probably rise, insurance prices (cant see them coming down)

the whole cost of living coming down line (so x%cut in wages is justified - it may be justified for other reasons) has me baffled.....living as far as I'm concerned is more expensive this year than it was last year or the year before that or before that and I don't think it has a lot to do with me perhaps being a bit more price conscious.

amacca

MrMatisse wrote: »

Id like to know whats driving it, assume the public sector

Somehow I don't think thats the whole story (though more than likely a very significant part of it)...crazily some business I deal with seem to be charging more because they now have less customers/footfall.

later12

The important point, in my opinion, is that core inflation is still negative.

Fuel prices and interest rates are volatile and as you hear on the radio, values can go up or down.

I would pay much less attention to the Irish rate for now (because it won't change significantly rapidly) than the European rate. It is the European rate overall that shall decide the pace and the possibility of ECB interest rate rises.

It wouldn't be totally surprising if the UK raised their rate in May and the Europeans raised the rate in Autumn. That's the big deal here, not the Irish rate (in my opinion). Both would have big, possibly longterm, implications in Ireland.

feicim

whiteonion wrote: »

Inflation is on the rise in Ireland and this is a development that worries me.
http://www.brecorder.com/news/latest/18023:irish-inflation-up-sharply-in-december.html

Minimum wage has been cut and I also have noticed that in other jobs as well the wages have dropped.

What are people going to do when the wages are going down and the costs of living are going up?

Interest rates need to go up very high to combat inflation, too bad Ireland does not have an independent central bank.

I heard the government was giving out free cheese...


Seriously though, the government has its head stuck firmly in the sand.

Reduced wages + inflation = big problem
mortgage defaults = big problem.
default on eu/imf loan = big problem

If the government hasn't even acknowledged that these will create big problems down the line, we can presume that they have no plans to deal with the fallout... they are probably quite happy that this will likely happen on the next governments watch.

amacca

later10 wrote: »

I would pay much less attention to the Irish rate for now (because it won't change significantly rapidly) than the European rate. It is the European rate overall that shall decide the pace and the possibility of ECB interest rate rises.

It wouldn't be totally surprising if the UK raised their rate in May and the Europeans raised the rate in Autumn. That's the big deal here, not the Irish rate (in my opinion). Both would have big, possibly longterm, implications in Ireland.

Tell me...where can one purchase tinned foods, shotguns and DIY bomb shelters?


only partially joking...its not going to be nice (imo) when the sh1t hits the fan due to ECB rates climbing.

whiteonion

They say a rise in interest rates would not drive down prices of fuel and food. I'd say if you raise interest rates your currency will get stronger and prices should start falling.

Inflation is very dangerous. It rapes the savers, encourages reckless speculation and voracious consumption.

digme

could printing 60 odd billion be the cause? :rolleyes:

liammur

later10 wrote: »

The important point, in my opinion, is that core inflation is still negative.

Fuel prices and interest rates are volatile and as you hear on the radio, values can go up or down.

I would pay much less attention to the Irish rate for now (because it won't change significantly rapidly) than the European rate. It is the European rate overall that shall decide the pace and the possibility of ECB interest rate rises.

It wouldn't be totally surprising if the UK raised their rate in May and the Europeans raised the rate in Autumn. That's the big deal here, not the Irish rate (in my opinion). Both would have big, possibly longterm, implications in Ireland.

No. The Irish banks will continue to raise interests regardless of what the ECB does. This will squeeze mortgages holders even further.
This is the worrying part. When the ECB rises further rates will be passed on.
As for energy, China will see that they keep going up.

later12

liammur wrote: »

No. The Irish banks will continue to raise interests regardless of what the ECB does.

No they won't - the Irish rates will change upwards if

1. The ECB cut them off at the tap through Emergency Liquidity Assistance or
2. The ECB rate itself increases.

In fact, the Irish interest rate is almost totally dependent on the European Central Bank's policy. In the short term, it is unlikely to change to any significant degree. Maybe by the end of the Summer things will be clearer.

Taxi Drivers

MrMatisse wrote: »

Id like to know whats driving it, assume the public sector

Although it is based on a CPI release from October here is an interesting take on the assumed relationship between CPI inflation and the public sector.

CPI and State-Controlled Sectors

Basically most public services do not have a consumer price, hence they do not appear in the CPI and at the time the public sector prices that did appear in the index were not pushing inflation significantly higher. I also note that from the most recent CPI release, it is clear that as later10 states above that core inflation remains negative.

It is important to not because of the big role mortgage interest currently plays in determining CPI inflation that although total inflation is positive not everyone is facing higher prices. Even with rising mortgage interest rates this does not affect all mortgage holders. There are tracker rate, variable rate and fixed rate mortgages. The increases up to now have not affected two of these groups. Unfortunately, the increases have been concentrated on those who hold variable rate mortgages.

tara73

I'm a bit puzzled about this thread.

Ireland is actually a country at the moment where DEflation is in place.

OP, youself said in your first post wages are falling, so how can this be seen as inflation, it's the opposite!
always rising wages, as we had it 6 years ago, are be seen in economy terms as an indicator of inflation.

whiteonion wrote: »

They say food prices have fallen, that is not something I have noticed! I shop at Lidl and I think many things have become more expensive in 2010 than it was in 2009.

if you look at dunnes/tesco/superquinn you can see that prices have fallen significantly over the last 2.5 years.

to take lidl and aldi as an example for inflation is actually almost funny. they were always low price supermarkets, often 2/3 lower than dunnes or superquinn in boomtimes.
so if lidl or aldi now raised something about 10 cent or so, it's not an indicator for rising inflation as they were always much cheaper than any other food stores.

rents have fallen, house prices have fallen, food prices have fallen, clothes prices have fallen and they are NOT on the rise again, they probably will fall further (at least rents and houseprices).

the only things are energy and fuel which might have risen, but they are imported, so there's a dependence to the overall rise in the worldmarket and not created by the irish economy.

recedite

ei.sdraob wrote: »

latest CSO report here

as has become the norm now, sectors controlled or run by the state continue to inflate

This report mentions Housing. I don't think house prices or rents are rising, so it must be due the fact that mortgages are rising because the lenders have increased the spread between their rates and the ECB base rate since last year.

whiteonion

The CPI is indicating inflation. You can have inflation while wages are falling.

later12

whiteonion wrote: »

The CPI is indicating inflation. You can have inflation while wages are falling.

Yes but core inflation is still negative, which is a more valuable measure of economic progress - although it is easing.

By an large there's nothing we can do about the CPI inflation bar destroy Brazil and China. Commodities, commodities, commodities.

whiteonion

later10 wrote: »

Yes but core inflation is still negative, which is a more valuable measure of economic progress - although it is easing.

By an large there's nothing we can do about the CPI inflation bar destroy Brazil and China. Commodities, commodities, commodities.

Inflation could be defeated by raising interest rates and set them very high. This is what the EU should do. They should raise the interest rates to at least 6-7%. This will make the currency stronger and inflation should start falling.

recedite

The purpose of the ECB is to maintain average eurozone inflation at or below 2%. There is no need for 7% interest rates. Boom/bust cyclical problems in Ireland fuelled by gombeen policies will eventually cease as we fall more under Euro economic control.

later12

whiteonion wrote: »

Inflation could be defeated by raising interest rates and set them very high. This is what the EU should do. They should raise the interest rates to at least 6-7%. This will make the currency stronger and inflation should start falling.

Where are you getting 6-7%, why have you arrived at that figure, exactly, given the recent flash fligure of 2.3% inflation, and a much smaller core inflation?

Secondly, the Euro is on a self imposed race to the bottom in the forex industry, Eurozone members don't exactly seek a particularly strong currency for 2011. A weak currency is actually in our favour in many ways.

liammur

later10 wrote: »

No they won't - the Irish rates will change upwards if

1. The ECB cut them off at the tap through Emergency Liquidity Assistance or
2. The ECB rate itself increases.

In fact, the Irish interest rate is almost totally dependent on the European Central Bank's policy. In the short term, it is unlikely to change to any significant degree. Maybe by the end of the Summer things will be clearer.

You have a little info but unfortunately not enough.

Irish banks simply have to continue to raise interest rates regardless of ECB. Watch this space.