Chart 1 - Bank of England inflation forecast February 2009
Hmm... now let me see...
A year ago, just before the Bank fired up its £200bn printing press, they expected inflation to fall into the range 0-1% pa, with a significant risk of outright deflation (charts relate to Consumer Price Index - CPI).
Today, they have revised up their figures to reflect the fact that inflation is currently running at just under 3% pa, and far from falling, is heading higher. It seems that inflation has refused to die despite the demise of our dear old friend GDP growth.
Undaunted, the Bank reckons inflation will soon fall back again, with apparently still something like a 20% chance of outright deflation.
Yet we know that sterling commodity prices are up 19% year-on-year, and we know that producer output price inflation has already accelerated to 4%.
Hmmm...
I have a very bad feeling about this.
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