Denseman on the Rattis

Formerly known as the Widmann Blog


Inflation is rising … again

11 months ago, I wrote the following about the UK’s inflation rate:

Many commentators clearly believe the Bank of England’s forecast that inflation will come down sharply during 2010. This is not really my expectation – so long as this country is depending on imports, and so long as the pound continues to be weak, I can’t see inflation dropping significantly.


Anyway, let’s see. My prediction is that CPI inflation won’t fall below 2.5% throughout 2010. Who would you put your money on? The Bank of England or the Widmann Blog?

As can be from the graph above, I needn’t have been so careful – CPI inflation didn’t just fail to fall below 2.5%, it actually stayed above 3% for the entire year.

I’m therefore not entirely surprised by today’s news that CPI inflation now stands at 3.7%. Given the recent VAT increase, I actually wouldn’t be surprised if inflation reaches 5% during 2011, but surely such a high figure would force the Bank of England to act, wouldn’t it? Or would they continue to believe their own lousy forecasts?

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