Readers Question: What is the relationship/theory between the OCR (Official Cash Rate) and Inflation? The Official Cash Rate is the interest rate the New Zealand Reserve Bank use to control inflation. It is very similar to the base rate used by the MPC, Bank of England. Graph Interest Rates New Zealand Because New Zealand commercial …
Readers Question: What is meant by the term inflationary noise? Definition of Inflationary noise. When inflation distorts price signals. If inflation is 0%, and Peugeot cars increase in price then this is a signal Peugeot are more expensive. However, if inflation is 5 or 6%, it is harder to work out whether the increased price …
Readers Question: Low inflation but slow economic growth, if any, or GDP growth , with the risk of 2 digits inflation? Which one is a better option,or the least harmful? The choice is not enticing. These are some point to consider: At the moment the UK economy is experiencing inflation of 5% (above the target …
Readers Question: I understand why, generally, low inflation is considered to be a good thing and why high inflation is bad particularly if you have savings whose value in real terms then diminishes faster. What I do not understand is why inflation is not in fact a good thing for those of us in their …
25 years ago, 12% of candidates received a grade A at A Level. Last year, that % rose to 25%. Maybe there are people in the government, who really feel that educational standards have increased by 100%. However, anyone involved in A Levels knows this is mainly due to changing grade boundaries so that a …
Readers Question: If British industry was to become uncompetitive it would have the following adverse effects on the economy: one of them is a higher level of inflation. How to explain that? If British industry becomes uncompetitive it means that basically, the UK’s cost of production is rising faster than our international competitors. For example, …
Despite a slowdown in retail sales during March (Sales fell 0.4% in the month) UK CPI inflation increased to 3%. Retail Price Index RPI (which includes more items) increased to 4.2%. This is at the upper limit of the Government’s inflation target. It is the highest UK inflation rate for quite a while. Last month, …
Readers Question: Can you please differentiate between the causes of once-off inflation and sustained inflation? A temporary period of inflation, also called one-off inflation, may be caused by: Temporary inflation in 2008 and 2011. Rising in tax rates. Suppose the chancellor announces a 10% rise in fuel duty. This means prices will rise. But, next …