CPI Hits 3.1% Triggering Letter To Gordon
Mervyn King was forced to write a letter to Gordon today after the Chav Price Index hit 3.1%, the highest level since the measure began in 97. The RPI, a more true measure of inflation, rose to 4.8%. Last time RPI was at these levels, interest rates were 7-8%, yet the Bank of England seems content that rates around 5% are enough to control inflation. Evan Davis hit the nail on the head today when he asserted that the China deflator may not be having such an influence as before. The Bank predicts CPI will fall back to target by the end of the year, but they have been incorrect with predictions in the past. If this prediction were to prove incorrect, the timing could not be worse. The letter, incidentally, was barely worth the 10-year wait, and was largely along the lines of “please don’t sack me”.
Meanwhile Gordon will soon face a vote of no confidence in parliament over the pensions fiasco, the Tories using an opposition day to table the necessary motion. This being parliament, Gordon is unlikely to lose the vote, but another vote - the local elections taking place in the first week of May - could prove far more damaging for Gordon.
