NIESR sees UK inflation to overshoot the Bank of England target for the next four years

NIESR sees UK inflation to overshoot the Bank of England target for the next four years.

NIESR sits in the small set of external forecasters the BoE-watchers treat as a useful counterweight to the Bank's own projections, and its calls have historically mattered less for any one number than for whether the independent consensus is converging on or diverging from Threadneedle Street's central case. A multi-year overshoot forecast of this kind bears directly on the credibility of the medium-term inflation anchor, which is the part of the debate that prices the belly and long end of the gilt curve rather than the front end, since it speaks to how restrictive policy must stay for how long rather than to the timing of the next MPC move. The relevant distinction is between an overshoot driven by fading base effects and one driven by domestically generated persistence in services and wages; the former has tended to be absorbed without a policy response, the latter is what has historically kept the committee on hold or forced it back toward tightening. NIESR's prior form in this position has been to sit hawkish of the Bank, so the read-through is whether the MPC's own forecast round and the commentary from its more inflation-sensitive members drift in the same direction. The follow-ons are the next MPC projection fan charts, the speech calendar from the hawks, and whether gilt breakevens begin to price a higher equilibrium rather than a longer hold. As third-party commentary, this reprices expectations only at the margin unless corroborated.