In 2021 it was forecasting 2 per cent inflation for today, yet it came in five times that as 2023 began ✒️ John Redwood via ipaperviews
John Redwood: ‘The Bank needs to revisit its models for forecasting inflation and output’
So the Bank of England has done it again. Just like last autumn, they have let it be known they might want to sell more bonds at big losses, while they plough on with a large sales and repayment programme for government bonds they own. Last autumn it was their statement of intent to sell £80bn of bonds a year coupled with their wish to raise interest rates that started the big bond sell-off. Last week it was musings about a bigger sales programme and market expectations of more rate rises to come on the back of poor inflation figures that triggered a similar sell-off.. This matters, as it directly leads to dearer mortgages, threatening those who need to renew their loans with a further unwanted cost of living squeeze.
The Bank needs to own up to the big mistakes it made in 2021, keeping rates too low and paying crazy prices for far too many bonds. Now all it wants to do is to sell too many bonds at much lower prices and big losses. This erratically destructive policy, if pursued too far, will lurch us from too much inflation into recession.
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