Star comment: Forecasts by Bank of England fall short
Here is the good news. In forecasting that the British economy would nosedive in the wake of any vote to leave the European Union, the Bank of England has been proved by events not to know what it is talking about.
Here is the bad news. The Bank of England does not know what it is talking about.
And to this we can add the latest news from the Bank of England. It has now made a dramatic increase in its growth forecast for the UK economy for this year. It expects the economy to grow by two per cent.
Ever since the eve of the Brexit vote when its gloomy assessments about leaving the EU could have been written by David Cameron or George Osborne, it has been forced to upgrade its growth forecasts several times.
Domestic demand has been stronger than expected, and there have been few signs of a slowdown in consumer spending. However the bank still sees the economy slowing in 2018.
As the bank has been changing its forecasts every few months, this latest forecast from its well-paid economics experts can be considered to be a snapshot.
In a little while everything may be different. In fact, what is certain is that everything will be different, as after the triggering of Article 50 and the start of negotiations with the EU, there are going to be unpredictable wild cards added to the pack.
The fall in the pound is going to drive a rise in inflation, the beginnings of which are already being seen, especially at the petrol pumps. Interest rates could potentially rise from their present historic lows, which would be a big blow to those just-about-managing people who do not have the financial resilience to absorb a hike in their mortgage payments.
It would be churlish not to find some cheer in what the Bank of England is saying. It presents a much more positive outlook for the nation's businesses.
The referendum and the immediate aftermath have not been the bank's finest hour. Past performance, they say in financial circles, is no guarantee of future performance. Which is just as well – if past performance is any guide, this new Bank of England forecast will be as wrong as the rest.
The fact that this is a more upbeat and, many would say, realistic forecast, does not acquit the bank of the charge that it is beginning to look faintly ridiculous.
