Looking forward, using the different indices available (either gilts and Bank of England spot or forward rates), what inflation rates would be expected? The expectation possibilities considered are “spot v forward”, “forward v gilt” and “gilt v spot”. While none of the expectations were negative, the spot value fell to 0.5% at the end of 2008 (during the financial crisis). For forward (gilts), the minimum expectation was 1.8% (2.3%) in 2008 (2002). What really matters is how well these estimates performed against reality.
|