The Bank of England is coming under increased fire after erroneously predicting inflation last month.
The bank stated in its quarterly report that it anticipated inflation to drop to 4.5 percent in the last quarter of 2023, following its decision to maintain the present high interest rate level.
Official data released this morning, however, revealed a considerably more notable decline in inflation, to just 3.9 percent.
The discrepancy has brought attention to the Bank’s excessive caution in raising interest rates over the past year and declining to lower them last month.
Even more pessimistic in light of today’s lower statistics, Governor Andrew Bailey’s economic experts forecast that inflation would drop to just 3.1 percent by the fourth quarter of the next year.
The Bank’s response to the inflation crisis has seen Mr Bailey come under renewed criticism, with yet more piling on.
Leading economist Julian Jessop noted that the steep decline in inflation today shows that the UK CPI still closely reflects the comparable US rate, albeit six months later.
By the same measure, UK inflation is expected to achieve the 2 percent target by the first half of 2026, even though the Bank of England is still adamant that Jeremy Hunt won’t do so until late 2025.
If confirmed, it would imply that the Bank of England’s projections show that struggling British citizens will have to tolerate excessively high interest rates for a lot longer than necessary.
Senior Tory MP Sir John Redwood also piled in on the bank, pointing out that yesterday’s speech by the deputy governor had denied they “helped cause the inflation and shrugged off their forecasting errors”.
He said: “No mention of the damaging sales of bonds at big losses. No clear forecast of what will happen to inflation.”
The Financial Times’ economic commentator Chris Giles added that the Bank of England “might be regretting ignoring all the evidence in its meeting last week” and accused them of being “asleep” about the reality of inflation.
The news of today will heighten expectations for interest rate reductions in 2024, as Work and Pensions Secretary Mel Stride hinted that the Bank of England would be able to lower interest rates due to the decline in inflation.
He said: “Those are matters for the independent Bank of England, they are not for me to predict, but if inflation comes down faster than expected, then that does take some pressure off the Bank of England in terms of keeping interest rates higher, which of course in time and in turn feeds into mortgage rates.”