Inflation: a good day for Cricket

Yesterday, Mervyn King, the governor of the Bank of England, used a cricketing analogy to describe the response of the Monetary Policy Committee (MPC) to the UK’s future inflation expectation.  He neatly summed up his opening remarks to the MPC’s quarterly inflation report as follows:

“At present, there are large upside and downside risks to inflation …The MPC will continue to judge the balance of risks each month. And, like the English batsmen preparing to defend the Ashes, watching carefully and perfectly balanced in the crease ready to play forward or back according to the length of the incoming delivery, so the MPC will watch the incoming data carefully, ready to adjust policy in either direction in order to keep inflation on track to meet the 2% target in the medium term.”

For the uninitiated in the labyrinthine workings of the game of cricket see this guide, but essentially all this forward and back business is a longwinded way of saying: we don’t know what inflation will be in two year’s time so we will wait and see and act accordingly.

Inflation Expectation November 2010The CPI inflation projection chart shows that at the end of the forecast period (2013) inflation could range from -0.5% to 4.5% although the MPC predicts it will most likely be just below the 2% target.

And while all this is going on and the men down under prepare to do battle in cricket’s longest standing rivalry, cricket, the insect, made a surprise appearance in the news – go figure!

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About Gideon Benari
Solvency II Wire a site dedicated to informing professionals in financial services industry about Solvency II, the new regulation for the European insurance industry.

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