The Bank of England’s quarterly Inflation Report scored the UK economy 3 out of 3 for economic improvement. First, growth is now expected to hit the dizzy heights of 2.9% in 2014. Second, the Bank now expects prices to have risen by just 2.2%y/y at the end of this year, considerably lower than the 2.9%y/y expected three months ago. Finally, the Monetary Policy Committee now expects the 7% unemployment rate threshold to be hit in 2015, fully a year earlier than in its August report. But the Bank underlined just how much uncertainty there is around this forecast. It reckons there is a 40% chance that unemployment will reach 7% before the end of 2014. As a result of all this revision, despite Forward Guidance, the outlook for interest rates remains as changeable as ever.
So, prediction is always hard, especially about the future!