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Bank of England's reputation is at stake in the interest rate tragicomedy

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Misplaced expectations often lead to wasted time. Pip, Vladimir and Estragon waiting for Godot, and even England fans crying out for the arrival of Jack Grealish during Euro 2020. These stories teach us that banking on something to happen can lead to opportunities going amiss. The Bank of England could be lumped into that group as it waits for inflation to pass.

Monetary policy is largely anchored by two aims: maintaining price stability and keeping inflation in check. The Bank’s forecasts for the latter have been off the mark lately. Inflation has risen from two per cent to 3.2 per cent in just a month. The Bank expects prices to rise four per cent by the end of the year – double its target. The longer inflation lurches away from target, the more confidence in the Old Lady will erode.

Mapping out a plan for the bond programme in the monetary policy committee announcement tomorrow would flex the Bank’s inflation fighting........

© City A.M.

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