In past iterations of this website, we have been looking at the data held back to 1985. This year, we have also looked at annual comparisons back to either 1985 or 1998 plus monthly comparisons (still looking at annual rates). This has led us to think that the experience prior to 1998 may have been unduly taken into account.

The “gilt annual 1985” chart shows that inflation over periods of 15 years was very much over-estimated for start years prior to around 1997. However, the “gilt annual 1998” chart shows that the over-estimates have since been far less extreme, with some under-estimates. The “gilt monthly 1998” chart is similar to “annual 1998”

Was making the Bank of England independent the reason for such a change (we doubt it)? While the later start period makes the estimates appear more accurate, the latter period is very much shorter, Further, over the next few years, we will see the impact of the financial crisis appearing, which we imagine is high.

Now let’s look at instruments other than gilts.