Can’t blame UK government for inflation now

May 17, 2011

A fair amount of UK inflation has been self-inflicted. As CPI and core CPI have risen since late 2009, CPIY (which strips out inflation from new taxes and the like) has stayed relatively low — one reason, perhaps, why the Bank of England has ┬áremained somewhat dovish.

Tax rises, in other words, have been behind a lot of UK inflation.

This is changing however. CPIY is still 150 basis points below CPI, but at 3.0 percent it is some 160 basis points above a low last July. So you can no longer blame the government. Underlying prices are rising anyway.


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