Monday, September 24, 2007

Inflation is up 2.9%!

Just like the media to play down the rate of inflation. It was reported the other way around that the average inflation rate is 1.3%.

Why we should not use the average inflation rate? Because the inflation rate increase is not one-off! It's because of the government insistence of increasing the GST rate, just before the subprime mess blown up. Inflation rates are going to be at least 2.6% from now on for a period of time. Food prices are shooting up due to global warming, plus the oil price. The CNA news article even got the July inflation wrong! July inflation was 2.6%, not 2.1%.

Let me rephrase the news article.

Inflation is up 2.9% (August) compared to a year ago.
Inflation is up 0.3% compared to July.

My guess is that the average inflation should be around average 1.8% this year, using an average of 2.8% until the end of the year. Next year it is going to jump even more.

Now, what's our bank interest rate? 0.25%
Now, what's our FDs for < $50,000? <1.2% for most banks.

Oh yeah... This is great!

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