BoE forecast, didn't see this coming.

Thrugelmir

ILW wrote: »

failing to be anywhere near inflation targets, which is one of their main tasks.

If you have no levers to pull. How do you influence the direction?

The BOE has to let inflation run free. As financial stability has to take priority.

michaels

So lets ask another question. Say the Boe had set rates high enough to prevent CPI inflation breaching 3% (I think their target is 2% +/-1?) Would the economy be bigger or smaller now in real terms?

ILW wrote: »

There is a difference between being out on growth forecasts and failing to be anywhere near inflation targets, which is one of their main tasks.

Thrugelmir

michaels wrote: »

So lets ask another question. Say the Boe had set rates high enough to prevent CPI inflation breaching 3% (I think their target is 2% +/-1?) Would the economy be bigger or smaller now in real terms?

Smaller. Interest rates would have to be higher. Thereby squeezing demand, in particular from consumers harder.

ILW

Thrugelmir wrote: »

Smaller. Interest rates would have to be higher. Thereby squeezing demand, in particular from consumers harder.

QE also added to inflation, in this case the BoE actually caused an increase.

Thrugelmir

ILW wrote: »

QE also added to inflation, in this case the BoE actually caused an increase.

QE or deflation. Along with a potential collapse of the banking system. Not an easy choice.

At least QE has enabled the banks to let taxpayers off the hook by repaying their Treasury loans.

ILW

Thrugelmir wrote: »

QE or deflation. Along with a potential collapse of the banking system. Not an easy choice.

At least QE has enabled the banks to let taxpayers off the hook by repaying their Treasury loans.

I would suggest that deflation has never been a true danger.

Thrugelmir

ILW wrote: »

I would suggest that deflation has never been a true danger.

Without QE, banks would have struggled to maintain both liquidity and inter bank activity. The economy would have bunkered down totally.

chucky

ILW wrote: »

QE also added to inflation, in this case the BoE actually caused an increase.

Actually no, they have swapped one asset class for another asset class that does not guarantee that QE was or is the cause for any inflation.

CRASH_BANG_WALLOP

ILW wrote: »

Inflation will remain above target for the next year or two.

What is the point of these people, give them a simple task, they fail completely and keep getting paid.

well at least we can be rid of one of the dudes. Has posen chucked it yet?

IronWolf

shortchanged wrote: »

No thankfully I don't.

But what is it that the BoE experts are seeing or more to the point what are actually missing all of the time when they make their forecasts?

Europe is a mess and is not being sorted. Unemployment remains very high, incomes remain squeezed for many. As I and others have stated for a long time, not conditions very conducive for growth.

Forecasts mostly rely on things carrying on as normal and nothing abnormal happen. Changes in previous trends usually send forecasts way off the mark. You just cant build a forecasting model that can cope with random events like a Euro crisis.

I think too many people on here expect far too much from forecasts. If anyone was that good at forecasting do you honestly think they wouldn't be loaded and retired in the Cayman Islands by now?