Inflation Expectations
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| Originally published | 2009 |
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| ID | 1123043 |
About Inflation Expectations
Inflation is regarded by the many as a menace that damages business and can only make life worse for households. Keeping it low depends critically on ensuring that firms and workers expect it to be low. So expectations of inflation are a key influence on national economic welfare. . . .
Defence spending: Will the government break its promise?
... And Inflation Expectations have risen since then, which means it s likely to be a bigger fall...
Why is inflation in US higher than elsewhere?
... The Fed - which launched its own stimulus policies at the start of the pandemic - was slow to respond to the price increases, even as Inflation Expectations in the US more broadly began to shift, says economist Ricardo Reis, a professor at the London School of Economics...
Defence spending: Will the government break its promise?
As the Prime Minister attends The Summit of the military alliance Nato, it has been widely reported that the government is going to break The Promise on defence spending that it made in its manifesto in 2019.
: " We will continue to exceed the Nato target of spending 2% of GDP on defence and increase the budget by at least 0. 5% above inflation every year of the new parliament. " GDP is a measure of the size of the economy.
We will return to the question of the Nato requirement of 2%, but in These Times of rising prices it is the inflation promise that is attracting attention.
Prime Minister Boris Johnson was asked about The Pledge on The Way to The Summit in Madrid and said: " We Are confident that we will meet that. You don't look at inflation as a single data point, you look at it over The Life of The Parliament and I'm confident we will meet that. "
In the manifesto it is clear that they were promising that in every year, defence spending would be higher than the previous year's spending by at least inflation plus 0. 5%.
And we know that that is not going to be the case.
The Treasury said at The Time of the Spending Review last autumn that Ministry of Defence spending would fall between 2021-22 and 2024-5 by an average of 0. 4% a year after adjusting for inflation.
And Inflation Expectations have risen since then, which means it's likely to be a bigger fall.
So The Pledge has been broken, but that's not the whole story of what has been happening to defence spending.
The Prime Minister said we should look at spending over the whole of The Parliament , which is the period between general elections.
If you do that it turns out that defence spending is expected to increase by an average of 1. 5% per year above inflation, which is considerably More Than the manifesto promised.
Why is that? It's because the government announced a for defence spending in 2020, which gave a lot of The Extra money in the early years.
In other words, if it had wanted to meet its pledge, the government could have spent the same amount of money over The Parliament and just kept some of it back to spend in later years.
But that would not have been more helpful for the Ministry of Defence.
What about the 2% target?Members of Nato are required to spend at least 2% of their GDP on defence, although only about One Third of them do so.
Mr Johnson said: " We Are currently running at 2. 3% of our GDP going on defence. "
That is a slightly different measure of defence spending to The One we have been talking about So Far , calculated by Nato itself, which includes some things that are not part of the Ministry of Defence budget.
For example, the spending on supporting Ukraine is coming straight from Treasury reserves, not from the Ministry of Defence. It counts towards our Nato figure but not towards the departmental budget.
The 2. 3% figure is the Nato estimate of UK spending on defence in 2021.
Is it enough?Defence Secretary to increase defence spending in light of the growing threat from Russia.
He is reported to be calling for spending of 2. 5% of GDP by 2028.
But there is also A Question of whether the Ministry of Defence has enough money to fund its activities at The Moment , although we do not know exactly how much its costs are rising.
It will be affected by fuel prices and the costs of military equipment tend to rise faster than the normal rate of inflation. And equipment sent to Ukraine will need to be replaced.
But it is unlikely that The Armed Forces' Pay Review Body will recommend a 10% increase in Pay .
Source of news: bbc.com