Increase in Inflation recently?

Purple

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I don't really get that Purple? I'm not disputing the CSO or the national stats. I'm merely suggesting that there are more precise and reliable ways to gauge the inflation rate on one's standard of living that using those figures. Those figures are a useful as a comparable guide that is all.
Yes, the CSO measures national rates. You're talking about spending reductions at an individual level. If coffee gets more expensive and everyone stops buying coffee the price has still gone up. If everything gets more expensive and everyone buys less of everything everything is still more expensive.
 

newirishman

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I don't really get that Purple? I'm not disputing the CSO or the national stats. I'm merely suggesting that there are more precise and reliable ways to gauge the inflation rate on one's standard of living that using those figures. Those figures are a useful as a comparable guide that is all.
What do you have in mind here?
 

WolfeTone

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You're talking about spending reductions at an individual level.

Not necessarily, that may be a consequence for sure of increasing prices.
If I'm a drinker and a smoker and continue to consume same levels as before a price increase then I experience the effects of inflation.
If I'm not a drinker or smoker, a national stat that includes the increase price of alcohol and tobacco is not really reflective of my experience.
I'm merely suggesting that the best way to measure inflation/deflation is to measure price increases on your own specific basket of goods and services that you consume rather than a national basket of goods and services, while useful as a comparable guide, is alot less precise.
 

joe sod

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Furthermore, central banks stamp out inflation by rising interest rates, the interest you pay on outstanding debt wil increase also leaving you worse off.
but when was the last time the central banks did that ? late 70s , early 80s over 40 years ago to fight the energy shock inflation of the 70s, also long before the euro and ECB. Remember the 1977 fianna fail election manifesto , cut in taxes, massive increase in borrowing . It was OK until the government had to re finance the borrowing at the much higher interest rates of the early 80s. Is history about to repeat itself ? huge increase in borrowing (doesn't matter because interest rates will stay low narrative) . Inflation has already begun again , huge increase in money supply running into constrained natural resource and factory production (caused by supply shock lockdown disruptions) equals inflation.
 

FinCork

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but when was the last time the central banks did that ? late 70s , early 80s over 40 years ago to fight the energy shock inflation of the 70s, also long before the euro and ECB. Remember the 1977 fianna fail election manifesto , cut in taxes, massive increase in borrowing . It was OK until the government had to re finance the borrowing at the much higher interest rates of the early 80s. Is history about to repeat itself ? huge increase in borrowing (doesn't matter because interest rates will stay low narrative) . Inflation has already begun again , huge increase in money supply running into constrained natural resource and factory production (caused by supply shock lockdown disruptions) equals inflation.
I've been thinking about this a lot recently, the central banks want more inflation to melt away some of the debt this crisis has caused, ideally 3-4%. however the genie can quickly get out of the bottle and it can go far higher but raising interest rates will likely mean a huge amount of business and government defaults, its a fine line.
 

Cervelo

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I'm not disputing the CSO or the national stats. I'm merely suggesting that there are more precise and reliable ways to gauge the inflation rate on one's standard of living that using those figures. Those figures are a useful as a comparable guide that is all.
I'm with Wolfe Tone here, The OP if I understood his their post wasn't really asking about inflation on a national level
but rather had anybody else noticed an increase in the cost of services that they just availed of
In the past few weeks I've bought a few services that I hadn't availed of for many months (doctor, dentist, physio), booked a few more and got take-away meals from some favourite restaurants that have recently re-opened. I've been struck by the price increases across the board from 5% to 15%.
On a personal level I would agree somewhat with the OP that prices are going up in nearly all areas of my spending
but giving that there are so many service providers or other alternative products or services to buy, I'm able to keep these costs down
and the only way to keep on top of it is to track your own personal spending rather than the national average spending
 

Leo

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Of course not, but if you are using less petrol and your income is the same then your cost of living has reduced.
Inflation being a measure of the increases in the cost of living.

Inflation isn't intended as a measure of personal spending patterns changing based on discretionary spending. Using the term inflation to reflect personal choices is an incorrect use.
 

Leo

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On a personal level I would agree somewhat with the OP that prices are going up in nearly all areas of my spending
but giving that there are so many service providers or other alternative products or services to buy, I'm able to keep these costs down
and the only way to keep on top of it is to track your own personal spending rather than the national average spending

Inflation measures the price of common goods and services across multiple suppliers to take that into account.
 

WolfeTone

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The OP if I understood his their post wasn't really asking about inflation on a national level

That is how I understood it too. The response being to contact the central authorities to compare.
Inflation isn't intended as a measure of personal spending patterns changing based on discretionary spending. Using the term inflation to reflect personal choices is an incorrect use.

True, it isn't intended for that purpose. But I suppose what I am trying to point out and if I'm correct, what others here are trying to point, is there is a growing perception of a not less than significant divergence from the official national inflation rate and what people are experiencing in their everyday lives. The consequence being, to question the value or relevance of these national inflation statistics. I revert to the comments of ECB chief LaGarde, speaking last month she said;

"our economies are changing increasingly quickly. We need to keep track of broad concepts of inflation that capture the costs people face in their everyday lives and reflect their perceptions, including measures of owner-occupied housing. This is not about moving the goalposts for monetary policy. It is about future-proofing how we measure inflation."

My interpretation is that it is a tacit admission that the methods used by central authorities to measure inflation are inadequate at best and, need some jiggery-pokery, to bridge the gap of the inflation rate that increasing numbers of people are perceivably experiencing against the official rate that they are being informed of.
 

Leo

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But I suppose what I am trying to point out and if I'm correct, what others here are trying to point, is there is a growing perception of a not less than significant divergence from the official national inflation rate and what people are experiencing in their everyday lives. The consequence being, to question the value or relevance of these national inflation statistics.
But if price increases are widespread, they should influence inflation. Your circumstances meaning you drive less than you used to shouldn't.

In reference to adapting to changing markets, adoption rates of technology in particular are now much greater than ever, so they do need to adjust when new products gain broad traction quickly.
 

WolfeTone

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In reference to adapting to changing markets, adoption rates of technology in particular are now much greater than ever, so they do need to adjust when new products gain broad traction quickly.

Or if older products lose traction quickly? For example, if I only use my car 50% of what I used it before covid. This can either be a widespread occurrence, reflected in national inflation stats, or it could be just me, reflected in my perception of the inflationary (deflationary) environment.

I'm not disputing the CSO stats, or any other official stats. I am querying their relevance when, in my opinion, their is a growing perception that those same stats do not reflect a reality in a lot of peoples lives. I think LaGarde is acknowledging this.
 

joe sod

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"our economies are changing increasingly quickly. We need to keep track of broad concepts of inflation that capture the costs people face in their everyday lives and reflect their perceptions, including measures of owner-occupied housing. This is not about moving the goalposts for monetary policy. It is about future-proofing how we measure inflation."
Interesting that she actually said "this is not about moving the goalposts for monetary policy" that means she is talking to a lot of people in the ECB where they must be discussing that. It's like when a child accidentally blurps out the truth " My Daddy says he is not here"
 

Purple

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Or if older products lose traction quickly? For example, if I only use my car 50% of what I used it before covid. This can either be a widespread occurrence, reflected in national inflation stats, or it could be just me, reflected in my perception of the inflationary (deflationary) environment.

I'm not disputing the CSO stats, or any other official stats. I am querying their relevance when, in my opinion, their is a growing perception that those same stats do not reflect a reality in a lot of peoples lives. I think LaGarde is acknowledging this.
Yes, the cost of living is probably lower in Damascus now than it was a few years back but there are other negative factors which have caused that.
 

PMU

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but when was the last time the central banks did that ? late 70s , early 80s over 40 years ago to fight the energy shock inflation of the 70s, also long before the euro and ECB.

2008 for the ECB; 2007 for the Bank of England; 2019 for the FED.
 

PMU

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If I'm paying back a €400k mortgage and inflation is running at 5% then the real cost of my mortgage drops by 5% each year.

Only (a) if you have a fixed-rate mortgage, as, in that situation, you are paying the fixed mortgage payment in money that is worth less.
But with a variable rate mortgage, banks just pump up their rates to maintain the value of mortgage repayments. Bankers don't get rich by handing out free lunches. Your mortgage is worth less to the bank (i.e. it is an asset that is being reduced in value by inflation), so they try to maintain the value by increasing mortgage rates, i.e by increasing your mortgage payments. And (b) only if your post-tax wages keep place with or exceed inflation. Otherwise you are paying more of your post-tax income to service your mortgage. And with a variable rate mortage interest rates will increase in excess of the rate of inflation, also reducing your post-tax income.

If your thesis were correct, all the advice given by numerous contributors on AAM that you should overpay or pay your mortgage early is incorrect. If you are correct the recommendation should be that, as a matter of policy, you do not pay off the mortgage early, i.e to allow inflation to reduce it in real terms and you should invest any surplus funds in the stock market, or just spend the money on enjoyment, rather than reduce the capital sum owed. It also implies that as you can't foresee future inflation with precision, but you believe inflation will reduce the value of your mortgage, you should take out the longest duration fixed-rate mortgage possible, to increase your chances of encountering a possible bout of high inflation in the future and thereby reducing your mortgage in real terms. But nobody giving this advice.....
 
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Purple

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Only (a) if you have a fixed-rate mortgage, as, in that situation, you are paying the fixed mortgage payment in money that is worth less.
But with a variable rate mortgage, banks just pump up their rates to maintain the value of mortgage repayments. Bankers don't get rich by handing out free lunches. Your mortgage is worth less to the bank (i.e. it is an asset that is being reduced in value by inflation), so they try to maintain the value by increasing mortgage rates, i.e by increasing your mortgage payments. And (b) only if your post-tax wages keep place with or exceed inflation. Otherwise you are paying more of your post-tax income to service your mortgage. And with a variable rate mortage interest rates will increase in excess of the rate of inflation, also reducing your post-tax income.

If your thesis were correct, all the advice given by numerous contributors on AAM that you should overpay or pay your mortgage early is incorrect. If you are correct the recommendation should be that, as a matter of policy, you do not pay off the mortgage early, i.e to allow inflation to reduce it in real terms and you should invest any surplus funds in the stock market, or just spend the money on enjoyment, rather than reduce the capital sum owed. It also implies that as you can't foresee future inflation with precision, but you believe inflation will reduce the value of your mortgage, you should take out the longest duration fixed-rate mortgage possible, to increase your chances of encountering a possible bout of high inflation in the future and thereby reducing your mortgage in real terms. But nobody giving this advice.....
Inflation reduced the value of a fixed sum of money. Therefore it reduced the value of a fixed amount of debt. I don't know what you don't get about that. The interest rate on the repayment is not relevant to that point.

If your income in increasing by 5% due to inflation then the real value of your debt is decreasing. The interest rate may increase or decrease with inflation but inflation itself has a compounding effect on the fixed debt.
I'm not making any point beyond that.

The more general problem is inflation had the same impact on debt as it has on savings, as it has on fixed incomes etc but for working people in normal economic circumstances inflation is a result of increased wages. That hasn't happened in the developed world since the automation of the services sector and the move of so much manufacturing to Southeast Asia. That's meant that more wealth is going to capital than is going to labour. That's not good for society.

On the issue of repaying mortgages early, if interest rates were higher than the rate of return on the capital markets then it would make sense to repay your mortgage sooner. They aren't so it isn't.
 

Leo

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Or if older products lose traction quickly? For example, if I only use my car 50% of what I used it before covid. This can either be a widespread occurrence, reflected in national inflation stats, or it could be just me, reflected in my perception of the inflationary (deflationary) environment.
As products become less relevant or tastes change, they are removed and replaced with something else.

If there is evidence that people are driving a lot less (which current traffic volumes don't support), then that would likely be factored into the overall calculations. Without insight into the exact formula I can't say what the impact would be, but the goal is to track such trends and be representative of overall costs of living.
 
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