–BOE: CPI Around 1.5% in 2yrs Time on Market Rates; stg200b QE
–BOE: CPI Around 1.7% in 2yrs Time on Unchanged Policy
–BOE: Chances of CPI Above/Below 2.0% in 2 Years “Roughly Equal”
–BOE: MPC: Inflation Risks Skewed to the Upside Vs Modal Forecast
–BOE: CPI Forecast Higher vs Aug Near Term; Similar 2 Years Ahead
–BOE: Only 1 in 4 chance CPI within 0.5pp of 2.0% in Two Years
–BOE: Wider Than Usual Range of Views on CPI Outlook Among MPC

By David Robinson and David Thomas

LONDON (MNI) – The chances of inflation being above or below the
above or below the Bank of England Monetary Policy Committee’s 2.0%
target are “roughly equal”, according to the BOE’s November Inflation
Report.

The forecasts in the BOE’s November Report are not greatly changed
from those in the August report, with inflation projected to be higher
in the near term but falling back well below 2.O% at the two year on the
modal, or most likely, projection.

“The overall distribution for inflation is higher than in August in
the first half of the forecast period, but by the two year point the
distribution is broadly similar,” the Report said.

The Inflation Report said there was a “wider than usual” range of
views among MPC over the impact of a number of major developments on the
economy, such as fiscal consolidation, confidence, higher savings and
the depreciation of sterling and rising global commodity price
pressures.

The Inflation Report contains a raft of different projections on
inflation. One key one is the probability of CPI coming in at the 2.0%
target in two years time.

“On balance, the committee judges that … the chances of inflation
being either above or below target by the end of the forecast period are
roughly equal,” the report said.

Those probabilities taken together are supportive of the MPC’s
decision to leave Bank Rate and the amount of quantitative easing
unchanged at the November meeting.

The modal forecast shows inflation on market rates and the current
stg200 billion well below the 2.0% target in two years’ time, at around
1.5%. The risks, however, on this forecast were said to be “skewed to
the upside”.

On unchanged policy and flat rates inflation was projected to be
slightly higher in two years’ ahead, coming in around 1.7%, because
markets expect very modest tightening through 2011 and 2012.

On growth the MPC sees “substantial uncertainties” around the
growth, with the strength of recovery dependent on how much net trade
supports demand and the extent to which the rise in savings falls back.

The modal projection showed GDP growth slightly above 3.0% in
two years time and staying around that level in three years time. The
forecast does show a slight dip in the rate of growth in the middle of
2011 to somewhere around 2.5%, which would still be above some estimates
of potential.

–London newsroom: 4420 7862 7499 e-mail: drobinson@marketnews.com

[TOPICS: M$B$$$,M$$BE$,MABPR$,MT$$$$]