The Bank of England will persistently miss its inflation target over the next two years, according to fresh forecasts published by the Old Lady today.
Officials on Threadneedle Street expect the rate of price rises to peak at five per cent in April next year and stay above its two per cent target in two years’ time.
The fiery inflation forecast was not enough to push the Old Lady into hiking interest rates today, as they were expected to do by financial markets.
The Bank will also see through the final leg of its QE programme, taking its total stock of assets to £895bn by the end of the year.
Inflation will hit 4.5 per cent this month and hover around that level for the rest of the winter, driven by soaring energy costs and food prices and supply chain bottlenecks persisting, the Bank said.
The five per cent inflation peak is higher than the government’s fiscal watchdog’s predictions. The Office for Budget Responsibility thinks inflation will scale to 4.4 per cent.
The Bank does think inflation will pull back towards its target, but not until end of 2024.
Officials on Threadneedle Street warned that supply chain breakdowns that have fuelled inflation “could persist for longer” if demand for goods remains elevated for longer than forecast.
The Bank revised down its forecasts for economic growth. It now expects the UK economy to reach pre-Covid levels by the first quarter of next year, as to its previous forecast of the final quarter of this year.