Bank of England inflation forecasts come under fire

Julian Harris
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THE Bank of England will face intense criticism from a Westminster think tank today for its increasingly wayward inflation forecasts.

The Bank predicted inflation of 1.9 per cent on average between August 2007 to May 2010, yet the out-turn was actually 3.2 per cent, the Centre for Policy Studies claims.

“Considering that inflation was only meant to be two per cent, this is a significant error,” the report states.

The latest consumer price index showed inflation of 4.5 per cent.

The Bank’s forecasts have worsened progressively since 2000, the CPS says.

“Given the justification for current ultra-low interest rates is the forecasting of low inflation in the medium-term, these forecasting errors are cause for concern,” a spokesperson warned.