Top forecasters call UK inflation relapse right

October 13, 2015

With Bank of England policymakers ready at a moment’s notice over the past several years to warn anyone who will listen that a rate rise is closer than we think or just around the corner or soon coming into sharper relief, the main instrument it targets – inflation at 2 percent – is having nothing of it.

Inflation fell back to -0.1 percent last month, confounding expectations for no inflation, suggesting that the markets are correct in predicting that the BOE’s Monetary Policy Committee is still a long way off from raising rates.


The most accurate forecaster in Reuters Polls over the past year on CPI, Allied Irish Bank, got it spot on, with another two in the top 10 list correct with a forecast for -0.1 percent.

Core inflation, the new proxy for headline inflation for those who are expecting a rate rise soon, fell back as well, to 1.0 percent. Only six of a smaller sample of 26 forecasters got that right, with only one expecting 0.9 percent. The high was 1.4 percent.

Economic theory dictates that with unemployment this low, wage inflation, which has risen lately, should be pressuring overall inflation higher. But the data strongly suggest there is very little in the way of inflation pressure in the UK economy. 

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