It would appear that a room full of economists are about as good at predicting the future as the weather forecasters. We have all read and heard the arguments about inflation creeping (or spiking) into our spending patterns and having a negative effect upon the money in our pocket, but now it seems that several of them believe that inflation is under control and could even morph into deflation. Quite a U-Turn.
One does have to question the validity of such statements and I cannot help but feel that there is a degree of spin going on so as to push the Bank of England not to raise rates. Several of these economists met today and appear to agree that inflation will be pushed down sharply next year to move below the Bank of England’s 2 per cent target, and say it is possible we will see deflation next year. The wonderfully named “Office of Budget Responsibility” (sounds like a Two Ronnies sketch) has forecast that inflation will peak this year before starting to come down next year and returning to the 2 per cent target by 2013.
There was a Treasury select committee meeting today following the Budget. It was asked whether the basis for the Budget and forecasts were or are sound. The now famous Roger Bootle who predicted the crash and ended up having the last laugh on those that did not take his book too seriously, said: “My own view it is the standard thing to do to assume that inflation will go back to target. The forces are in place to bring inflation sharply down next year. I doubt it will stop at the target and we will actually end up with inflation much lower than 2 per cent and not only that but inflation will be driven into negative territory.”
The National Institute of Economic and Social Research  (NIESR) also gave evidence to the committee and sugggested that the prospects for inflation were uncertain, with a 90 per cent chance that in 2012 inflation will be somewhere between 0 and 4 per cent. (I can hear you laughing!) Yes believe it or not a statement that a range of between 0% and 4% is what some people think is a reasonable outcome for their time and employment at NIESR.
This is all somewhat of an about turn at a time when the calculator gang over at the Office for National Statistics put a figure on the Consumer Prices Index measure of inflation which rose from 4 per cent to 4.4 per cent in February, the highest level since 2008.
Convinced enough to bet your mortgage on this? me neither.
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