Monday, March 09, 2009

Is Deflation Here?

Although I've long thought that the government made a mistake* in using the Consumer Price Index to measure inflation, rather than the Retail Price Index which includes house prices I haven't actually been following the RPI. Anyway looking it up now, it appears that with the collapse in house prices we may already have deflation:

Maybe 'printing money', is something to be welcomed.

* I say a mistake, but it was politically convenient because it allowed the government to claim that it had conquered inflation, whilst simultaneously allowing all those home owning swing voters to benefit from rising house prices.


Mark Wadsworth said...

That depends whether you want house prices to plummet as far as possible or not.

Ross said...

House prices are like a cat stuck up a tree, even if it wasn't a good idea to climb so high in the first place the correction to the right level should be gradual or it will be painful.

I want house prices to fall relative to income but not too quickly.

Rob said...

Funny how inflation plunged right about the same time as VAT was cut by 2.5%.

That was the aim of the VAT cut! To make it look as if we are ploughing into deflation so they can turn on the printing presses and wipe out government debt with inflation.

It was worked a treat, it seems.