Economic Indicators 

Mispredicting inflation

Chris Dillow

Chris Dillow
Mispredicting inflation

The Bank of England got it wrong. This will be one message of next week’s inflation numbers. They are likely to show that consumer price index (CPI) inflation ended 2019 at around 1.5 per cent. In November 2017, however, the Bank raised interest rates because it feared that, with so little slack in the economy, “domestic inflationary pressures are likely to build”. (I take that period because it takes around two years for rate changes to fully affect inflation.) It forecast then that inflation today would be 2.2 per cent, with only around a one-in-three chance of it being 1.5 per cent or less.

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