User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday September 19, 2005 - 12:21:18 GMT
Lloyds TSB Financial Markets -

Share This Story:
| | Email

Will higher inflation mean the UK is facing stagflation?

Economics Weekly: Economic Research and Analysis: Will higher inflation mean the UK is facing stagflation?

A threat of stagflation
UK consumer price inflation is accelerating, and is above target, see chart A, for the first time since 1997. Inflation is also on the rise in categories other than energy - although it remains below 2%, core inflation (which excludes energy, food and tobacco from the headline rate) is also rising, see chart. Figures for September are bound to see inflation go even higher, perhaps hitting 2.7% on an annual basis. Fortunately, producer output price inflation, though rising, remains fairly low and restrained as does wage inflation, see chart B. This implies that companies are taking the rise in their input costs in their profit margins and consumers have taken the hit of higher energy costs on disposable income by cutting spending. In short, since they cannot raise wages, UK households seem to have reduced their outlay on other consumer items. This seems one way in which the rise in energy prices has put a dampener on consumer spending. Chart C shows this most graphically, with the rise in energy prices in the CPI almost exactly correlating with the trend of retail sales volume over the period 1997 to date. Since energy prices have risen sharply from the start of 2004, retail sales growth has fallen off sharply in response. A slowing housing market and rising short term interest rates have undoubtedly helped to slow the growth rate of consumer spending, especially\ given the high level of personal debt, but oil price rises have also played an underrated role. But this may therefore mean that price inflation is not a serious concern, since it is likely to remain low if wages and firms output price inflation remain weak, as they do not respond to high energy prices.

Inflation is higher and growth weaker
But consumer and retail price inflation have turned out to be higher and growth weaker than the MPC predicted in its Inflation Report in February this year. It is this mix that gives rise to worries that it will not now be able to cut interest rates if growth remains weak, and does not recover as expected. This raises the question of whether the UK faces stagflation, depressed growth with high inflation. Consensus forecasts in September show that UK economic growth this year is put at 2.0%, but with consumer price inflation expected to average just 2.0% (bang in line with the inflation target) and interest rates ending the year at 4.4% this means that in reality the UK is a long way from stagflation. However, overall inflation trends in the UK are clearly not as low as they appeared to be a year ago when consensus forecast were looking for consumer prices to rise by just 1.7% this year and growth to be 2.6%.

But no stagflation
Looking ahead at medium term inflation pressures also show why the MPC may still be worried. The UK economy is successfully making the adjustment from being a manufacturing based economy to one where higher value added services (partly to meet demand from skilled manufacturing) is the driving force. This is why employment can be at a record high and unemployment still at a 30-year low even though manufacturing industry is still shedding jobs. But this means that the UK effectively has two inflation rates; one related to the services sector and one to the manufacturing, or goods, sector. Chart D shows that annual inflation is running at 4.5% in the higher value added and faster growing services sector, accounting for some 70% of the economy in terms of output. But inflation is only rising at 0.6% in the goods sector, accounting for 15% of the economy and more open to international price pressure than services. Moreover, it is an area where the UK may have less international competitiveness. However, chart D suggests that the deflationary effect of global competition and technical advances (computers, digital cameras TVs etc.) may be fading. The exchange rate of the pound is no longer rising so is exerting less deflationary effect on UK import prices, oil prices are much higher and the limits to the deflationary effect of falling goods prices globally may have been reached. Rising goods prices means higher overall inflation.

In this case, medium term inflation pressure may yet remain more intense than in the last few years, so making the job of the MPC much more difficult. It may not be stagflation, but the loss of relative freedom to set interest rates that the MPC has enjoyed since 1997 may make it feel like it to them.

UK economic indicators
The minutes of the MPC meeting of September are likely to show that the impact of Hurricane Katrina, high oil prices and UK inflation trends figured highly in discussions. But interest rates were left on hold and that must be due to satisfaction with the 4.5% level reflecting the balance of risks. Government borrowing data this week, Tuesday, are likely to show that the Chancellor may have to raise more this year from the markets than planned in the spring Budget. Money supply growth remains high, suggesting ample liquidity in the economy, but CBI data will suggest that for companies to be encouraged to spend and invest more, their orders need to be higher.

Trevor Williams, Chief Economist
[email protected]
Lloyds TSB Bank,
Financial Markets
Faryners House,
25 Monument,
London EC3R 8BQ
0207 283 - 1000

Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.


Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."

Actionable trading levels delivered to YOUR charts in real-time.

Register To Test Your Amazing Trader

GVI Trading. Potential Price Risk Scale
AA: Major, A: High, B: Medium

Mon 10 Sep 2018
AA 08:30 GB- GDP, Trade, Output
Tue 11 Sep 2018
AA 08:30 GB- Employment Decision
A 09:00 DE- ZEW Survey
Wed 12 Sep 2018
A 12:30 US- PPI
A 14:30 US- EIA Crude
A 18:00 US- Beige Book
Thu 13 Sep 2018
A 1:30 AU- Employment
AA 11:00 GB- Bank of England Decision
AA 11:45 EZ- European Central Bank Decision
A 12:30 US- Weekly Jobless
AA 12:30 US- CPI
Fri 14 Sep 2018
A 08:30 GB- GDP
AA 12:30 US- Retail Sales
A 13:15 US- Industrial Production
AA 14:00 US- prelim University of Michigan

John M. Bland, MBA
co-founding Partner,

Global-View Affiliate Program

We are starting an affiliate program to market some of our products.

Send me an email if you would be interested or if you know someone who would like to be an affiliate. Generous commissions payout for those accepted.

Put the word "affiliate" in the email subject line.

Contact us

Start trading with forex broker Markets Cube

Max McKegg's Daily Forex Trading Forecasts

Veteran FX Trader, Max McKegg, forecasts all the Major currencies and the Australasians; providing Daily and Medium Term Trading forecasts to subscribers, who include large Banks the world over, as well as individual traders in more than 30 different countries.

Request a TRIAL of Max's Forex Service.


Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map

Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.



By using this website, you are agreeing to our Privacy Policy and Terms of Use, and Cookie Policy

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105