Gordon Clown .Com

Much as Gordon hates it, the MPC’s desperate flapping attempts to keep runaway inflation under control seem likely to lead to another interest rate rise, possibly as early as next week.  Swervin’ Mervyn King has commented that the rocketing money supply of 14% per year might - just might - be a sign that inflation is out of control.  Indeed with RPI already at 4.6% it’s hard to find anyone else who might have missed this fact - aside from Gordon of course. 

Desperate to keep rates down and voters happy, Gordon will no doubt attempt once again to knobble the MPC and fiddle the CPI figures for the umpteenth time.  The Office for National Statistics recently upgraded the weighting of fuel and oil in the CPI basket, a cunning move as with Oil prices currently lower than this time last year, they would at their current price be contributing to bringing CPI down from the current sky high 2.8%.  No sooner had they done this, however, when Iran stepped in and grabbed 15 Brits, which has helped push oil back up a few dollars per barrel.  And if the situation doesn’t get sorted soon, the price may rise yet more, and Brown and the ONS could be laughing on the other side of their faces.

Here’s what Merv had to say about M4:

Mr King said policymakers should ignore the recent increase in money floating around the UK financial system at their peril, saying it indicated that inflation would soon rise.
 
His comments, to the Commons Treasury Select Committee yesterday, underlined expectations that the Monetary Policy Committee is prepared to lift borrowing costs to 5.5pc either next month or in May.

Mr King said: “I’m more concerned with monetary aggregates than some of my colleagues. To ignore it as a potential influence could lead into tricky territory.”

“My concern about the money numbers is whether they are telling us something about the inflation numbers not in two years but in maybe three to five years. To ignore it as a potential medium-term influence could lead into potentially tricky territory.”