The rate of unemployment was published to day and sits at 7.7 per cent in the three month period between June and August. It is the last set of figures to be published before the next Bank of England inflation report as the next monthly publication date coincides with that report on 13 November. What better time, then, to compare the BoE’s all-important August inflation report forecast with the published official figures.
In the August forecast, the BoE mean prediction for Q3 unemployment rate was 7.9 per cent, with a standard deviation of 0.1 percentage point around the mean. In English: after adjusting for risks, the Bank thought unemployment was not likely to be more than 0.1 percentage point away from 7.9 per cent and almost certainly not 7.7 per cent*. In lay terms, the forecast below was a stinker.
I am not concerned at all that the BoE produces a horrible forecast. That’s life. It has no bearing on the BoE’s credibility. What matters is the way the central bank will respond. There are two broad sorts of responses it can choose. Read more