It’s a big week for the Bank of England.
On Tuesday, we find out how badly it missed its inflation target last month. On Wednesday, we get to hear how badly it believes it will miss its inflation target for the next couple of years, when the quarterly inflation report comes out.
Will Mervyn King and the gang start softening us up for a rate hike? We’ll soon find out.
Meanwhile, if you just can’t get enough inflation data, then you should check out The Billion Prices Project. The idea is to use the wonders of the internet to give a real-time view on how rapidly prices are rising.
The creators, MIT professors Roberto Rigobon and Alberto Cavallo, use data collected from online retailers and updated on a daily basis to give a daily measure of consumer price inflation. They monitor more than five million products across a range of categories. The index “is not designed to forecast official inflation announcements, but to provide real-time information on major inflation trends”.
Unfortunately, they don’t do a version for the UK at the moment (it’s currently being updated). But it’s interesting to note that – according to the BPP at least – the rate of growth in US inflation has picked up speed recently. As Jim Leaviss of M&G puts it in his blog on the index “the year on year numbers are showing 2.25% inflation on the BPP measure compared with 1.5% on the official Bureau of Labor Statistics numbers”.
It may not be that long before US Federal Reserve chairman Ben Bernanke has to start downplaying the persistence of inflation in the same way that our own Mervyn King is trying to blame rising prices over here on ‘temporary’ factors. The threat of rising rates in the UK is bad enough – if the markets start to think that the Fed will be pushed into raising rates, that would really spook investors.
What can investors do about rising inflation? In the next issue of MoneyWeek magazine (out on Friday), we’ll be looking at one of the main drivers of global inflation around – food prices. My colleague James McKeigue last looked at the sector in July last year (Harvest profits from agricultural growth), when the biggest concern was that there would actually be a glut of various soft commodities. Since then, many agriculture-related stocks have taken off, but there’s still plenty of opportunity in the sector – read all about it on Friday. If you’re not already a subscriber, subscribe to MoneyWeek magazine.