When will inflation return to the target rate? According to its latest forecasts, the Bank of England isn’t expecting inflation to slow to 2 per cent until 2025. But could this happen much sooner?
Several independent forecasters are growing in confidence that inflation could get down to 2 per cent this spring, rather than next spring. Oxford Economics now expects inflation to average 2.1 per cent this year (a full percentage point lower than it expected in November). They also expect the inflation rate to slow to the annual rate of 2 per cent in April, as Ofgem once again lowers the energy price cap and last year’s higher prices fall out of the calculation.
Deutsche Bank is also optimistic that inflation could return to target in Q2 this year, thanks to lower energy costs. The surprise slowdown in the rate – to 3.9 per cent on the year in November, notably below market predictions – has made the prospect of returning to target sooner far more plausible.
The return to 2 per cent would open up a host of options for the Bank: not least a serious discussion about reducing interest rates.
Comments
Join the debate for just $5 for 3 months
Be part of the conversation with other Spectator readers by getting your first three months for $5.
UNLOCK ACCESS Just $5 for 3 monthsAlready a subscriber? Log in