Two interesting tidbits on inflation today.

First, at the Treasury Select Committee this morning, Mervyn King, Bank governor said he had essentially defeated Britain’s inflation problem.

“The projections that we published in the inflation report a couple of weeks ago have the characteristic that the inflationary pressures are pretty much back to target by around the middle of this year.”

To show this requires a bit of simple statistical manipulation of the Bank’s latest inflation forecasts and the application of the most simple seasonal adjustment techniques to the quarterly inflation data to get the following chart. It is very similar to one published by David Miles, MPC member,  in his speech last week (when I was on holiday) which uses more sophisticated seasonal adjustment.

The idea of the chart is rather neat because Read more