The Institute RPIX
forecast is also significantly better than the same outturn based naive forecast.
The new target is 1/2 percentage point below the RPIX
-based target, reflecting differences in the way that RPIX
and CPI inflation are measured.
There have been substantial falls in the consensus one-year ahead RPIX
inflation forecast (3) since the new monetary arrangements were put into place.
In reality, the actual target of Bank of England policy is the expectation of RPIX
inflation in the domestic economy.
The question can be addressed by investigating the recent behaviour of RPIX
and HARP Figure 1 shows the recent behavior of 12-month percentage changes of the two indexes, and the table below shows means and standard deviations.
The Bank of England has published density forecasts for RPIX
inflation from 1993Q1.
For that reason the formula used to calculate CPI inflation is superior to the formula used in RPIX
In October, for example, RPIX
, which takes account of the housing boom, showed an annualised inflation rate of 2.
inflation deviates more than 1 per cent from the central target, the Governor of the Bank of England is expected to provide a written explanation to the Chancellor of the Exchequer as to why the inflation target has been missed.
5 per cent RPIX
inflation rate currently aimed at by the Bank of England, roughly the gap between the two measures over time, the source said.
inflation is likely to remain above the Government's target of 2.
In its latest inflation report, the bank predicted RPIX
would fall below target by next year despite the weakness of the pound.