Mervyn King was in typically subdued form, presenting yet another inflation report in which the Bank of England has revised higher its forecast for inflation and revised lower its forecast for growth.

As I will go on to explain, the Bank has significantly revised its growth forecasts lower – losing about 1 year of growth at current rates since February’s forecast – but the Bank governor was rather reticent to spell this out.

The “big picture”, he said, is that the Monetary Policy Committee’s “medium term judgment is broadly the same” as it was in February. I will come back to this, but the governor was looking at a particular way of reading the Bank’s forecast growth rates in 2013, not the level of output. As he is the first to assert, it’s the levels that matter, stupid, not the growth rates.

The level of output the Bank believes is sustainable has declined a lot in the latest forecast. I have a pretty good record of decoding the Bank’s pictorial forecasts and I estimate the Bank has reduced its central forecast for the level of output in Q1 2014 by 1.7 per cent. At current growth rates, we seem to have lost a year of growth in forecast revisions.

Before I show some forecast charts, here are the answers to my questions from last week we learnt from the governor this morning.

1) How permanent does the MPC judge the winter slowdown to be? Read more