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Will immigration brake British inflation?

LONDON Jolanta Muraczewska, a waitress in a London coffee shop, is helping keep British inflation at bay. Next, she may blow the Bank of England off course.Muraczewska, 22, is a Polish immigrant. She and thousands more like her who have arrived in Britain since the European Union expanded in 2004 are willing to work for minimal pay, holding down wage inflation in the second- largest economy in Europe after Germany. If the bank underestimates the future impact of immigration, as some say it is, it may set interest rates higher than they need to be.

The bank's forecasts "assume immigration's effects will wear off," said Michael Saunders, chief Western European economist at Citigroup in London. "My guess is it will stay high. The bank risks undershooting its inflation target," which is 2 percent. More than 400,000 migrants from eight East European countries registered to work in the first two years they had access to Britain, the government said Aug. 22. It had expected 26,000 to come. The volume of new workers has created a political backlash against Prime Minister Tony Blair's Labour Party. About three-quarters of citizens want to limit immigration, according to a Sept. 4 poll by YouGov, a market-research company. Gordon Brown, chancellor of the Exchequer and Blair's likely successor, said this month he would seek "managed migration in the future." The Government Actuary's Department, which calculates the difference between those staying at least a year and those leaving, now says that net immigration will fall to 145,000 in the year to June 2008, almost half the level in the first year of EU enlargement. The central bank cited those forecasts in the minutes of its meeting this month, which were published Wednesday.

http://www.polishexpress.co.uk/en/newspaper.aspx?more=9

Re: Will immigration brake British inflation?

Economic and journalistic nonsense .

Re: Will immigration brake British inflation?

" Michael Saunders, chief Western European economist at Citigroup in London" !

Re: Will immigration brake British inflation?

The Polishexpress is not what I would call a reliable source. As can be seen from this article the quality of the writing is also abysmal.

If you're interested in inflation see:

http://www.statistics.gov.uk/cci/nugget.asp?id=19

Re: Will immigration brake British inflation?

Neither is the daily Mail.

It's translated from Polish purely for the website so they're prob not too bothered with perfecting their prose.

Re: Will immigration brake British inflation?

How ridiculous. The Daily Mail is a real newspaper. Not an internet website and free giveaway rag for the Polish peasantry fleeing poverty in Poland.

Re: Will immigration brake British inflation?

An Extract from an FT article :

http://www.ft.com/

A pregnant bump in British inflation
By Samuel Brittan

Published: January 25 2007 20:32
" As the governor more or less said, demand pressures would have led to still higher inflation had it not been for the “safety valve” of immigration which has produced an inflow of willing workers happy to work at the going pay rates. "

Re: Will immigration brake British inflation?

" Polish peasantry fleeing poverty in Poland. "

That's a very judgemental and rude comment Angela.

Re: Will immigration brake British inflation?

It's an accurate description of the majority of Poles coming over to the UK.

Re: Will immigration brake British inflation?

In the words of Poland's President Lech Kaczynski, "Britain has become a "destination of choice" for "feckless Poles"

He added: "We know that there are those who have succeeded in the UK and have jobs and are doing very well, thank you, especially considering the difference in wages between the UK and Poland.

"But these people are registered as unemployed in Poland, so they are living a fiction and raising unemployment figures in Poland while they are doing very nicely in the UK and their unemployment benefits should rightly be sent to London. This is something we would like to do without."



Downing Street Interview, October 2006.

Re: Will immigration brake British inflation?

Feckless means 'worthless, irresponsible; indifferent; lazy'.

Re: Will immigration brake British inflation?

Three messages have been deleted from this thread. Let's please keep things as civilised as possible.

Re: Will immigration brake British inflation?

Wasn't me for once

Re: Will immigration brake British inflation?

Once again the myth of wage caused inflation raises its head. Wage inflation predicts unemployment not broad based inflation. Wage inflation is a lagging indicator. True inflation can be initiated by several causes: devaluation, excess growth of money supply, and growth of marginal tax rates amongst others.

It’s amazing what passes for an “economist” nowadays.

For the truly boring on this forum:
http://65.89.19.70/research/PolicyDis/pd1.PDF

Conclusion
There is little systematic evidence that wages (either conventionally measured by compensation or adjusted through productivity and converted to unit labor costs) are helpful for predicting inflation. In fact, there is more evidence that inflation helps predict wages. The current emphasis on using changes in wage rates to forecast short-term inflation pressure would therefore appear to be unwarranted. The policy conclusion to be drawn is that inflation can appear regardless of recent wage trends.

Re: Will immigration brake British inflation?

Exactly.

Thank you for your, as ever, thorough explanation, slepowron.