Back in March I said: “As I suggested in my comments on the budget, the probability of inflation falling to 2.9% by the end of the year is a grossly optimistic forecast”. And so it has turned out to be. Instead of inflation falling below its 2 per cent target within a year, which the Bank of England had forecast, the Bank now thinks it will only hit the goal in 2025. So Bank Rate has been raised again to 4.5%.
It really brings into question the competence of Andrew Bailey and Bank of England forecasters when an amateur financial commentator like me can be more accurate.
Inflation is always very sticky. When people see prices rising they adjust the prices they expect to pay and the wages they demand. And companies pay little attention to the exhortations of politicians.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )
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