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|User Info||Letter to UK MP's re inflation; entered at 2010-11-17 16:48:08|
Registered: 2007-07-26 UK
Sorry I originally posted this in the wrong Forum, didn’t scroll down enough.|
For UK members, if you are fed up with the rate of inflation in the UK due to the Bank of Englands interest rate policies please use the letter below which i have sent to my MP.
Use as much or as little of it as you feel fit and edit it for your personal circumstances.
You can write to your MP here. http://www.theyworkforyou.com and http://www.writetothem.com.
From the Bank of England’s website "Price stability is defined by the Government’s inflation target of 2%"
Also even though the previous government made the Bank of England independent to set interest rates, again from the BofE website "The Bank is accountable to parliament and the wider public" and in " extreme circumstances, the national interest demands it, the Government has the power to give instructions to the Bank on interest rates for a limited period"
Are you aware that since inflation broke the 2% target in July 2005, inflation has been above target for 50 of the following 64 months, 78% of the time! So my questions to you are
1. Why are questions not been raised in parliament about the inability of the Bank of England to meet its target over such an extended period?
2. Why do the current Governor and Board of Directors of the Bank of England still have a job as they are not doing their job?
3. Why are you allowing the bank of England to set negative real interest rates thus destroying the value of people’s savings? On this point, how much tax revenue is the government loosing due to the Zero Interest rate policy (ZIRP)?
In his letter to the chancellor
Mr King states “the current elevated rate of inflation largely reflects a number of “temporary” influences, including the restoration of the standard rate of VAT to 17.5% in January, past rises in oil prices and the continued pass through of higher import prices following the depreciation of sterling since mid-2007.”
He uses the word temporary, as I have pointed out inflation has been above target 78% of the time since July 2005 this can no longer be termed “temporary”
There is no mention of the fact that the temporary reduction in VAT helped reduce inflation which was still above target at the end of 2009.
Sterling has been weak due to the Bank’s own policies of ZIRP together with Quantative easing (Money Printing) So in effect the Bank is causing the inflation which brings me back to my second question.
Mr King believes that inflation will be “temporary” due to the “downward pressure on inflation from spare capacity - pressure which can, in part, be seen in the labour market, where wage growth has been subdued at around 2% - but considerable uncertainty remains about that impact.” Generally known as Stagflation.
So what is going to be the effect of this “temporary” inflation, in my view you are likely to see the following two scenarios play out.
Firstly, people on fixed incomes (Who have already seen their savings income reduced to zero) and low incomes are going to have to spend an ever increasing proportion of their budgets on the necessities of life (food and fuel, gas prices up?), leaving less income for discretionary spending. Businesses that rely on discretionary spending will experience lower sales and will therefore be forced to cut costs (jobs), thus the weak economic cycle continues until MP2 arrives in the UK leading to lower sterling and higher “temporary” inflation and the cycle continues.
Secondly, companies are beginning to experience input cost pressures. This will lead to margin contraction and is also likely to lead to further company restructurings, for which read lay-offs.
So are you going to make the Bank accountable to Parliament?
I look forward to your response