Governor of the Bank of England Andrew Bailey (Toby Melville/PA)
(Picture: PA Wire)How many times over the past two years has the Bank of England forecast a significant, lasting problem with inflation? The answer is “never”. Yes, the Bank is prepared to accept that inflation might be rather punchy at any one moment in time. The Bank will even acknowledge that inflation might still be rather high 12 months down the road. But in two years’ time? Never.
This longer horizon is important because the Bank believes the full impact of interest rate decisions made today will only be felt in two years’ time. All sorts of random events can affect inflation in the near-term term – Covid-related supply shortages, invasions of neighbouring states by malevolent forces – but over the longer term, it’s monetary policy that matters.
