Stagflation Risks in the Economy?

[biotechpete]

There has been a lot of talk in the media the last couple of weeks about price increases due to the pound falling. Fuel and food are the biggest, but everything we import will be going up in price eg cars, TVs, clothes etc. So inevitably inflation will rise. The cost of a 'basket of goods' must be going up by some 10-15% once the effects feed through.

 

At the moment FTSE companies are increasing in value as their offshore profits increase in the conversion back to sterling. But higher costs (and possibly tariffs) will feed through to them presumably.

 

So at the point at which inflation kicks in, wage demands will rise, interest rates will go up, but companies will be cutting back.

 

Are we heading for a stagflation nightmare?

http://www.investopedia.com/terms/s/stagflation.asp

[L00b]

Are we heading for a stagflation nightmare?

http://www.investopedia.com/terms/s/stagflation.asp

Depends if May makes good on killing off QE stimulus and replacing it with infrastructural stimulus or not, and on the extent of the infrastructural stimulus required to break the cycle. I can't see anything else apt to avoid stagflation. If a hard Brexit happens, that is.

 

I'd say crunch time is going to start around year end. End of Q4, when the 10-15% GBP value differential today will have permeated import invoicing cycles (at 90 days or less) the length and breadth of the country.