Does the OBR believe the Bank will keep control of inflation?
The Office of Budget Responsibility has given a broad hint that the Bank of England’s inflation forecast is too optimistic. In it’s most recent Inflation Report, the Bank said that
Inflation was thought to be around its peak and was set to fall back sharply through 2012.
After that, the Bank admits that there is a great deal of uncertainty, but the MPC’s “best collective judgement” is that
inflation is more likely to be below than above the 2% target at the forecast horizon 
The Bank measures inflation by the Consumer Price Index. Now, that formulation may strike you as a masterpiece of bureaucratic draftsmanship, but how persuasive has the Office for Budget Responsibility found it?
Of course, the OBR cannot say that CPI inflation will be over 2%. The Monetary Policy Committee has a responsibility to get inflation down to that level and saying that it would be higher would be tantamount to saying that the BoE policies on quantitative easing and interest rates are unjustified. This would throw the government’s economic strategy up in the air and the other assumptions on which the OBR’s forecasts are based.
But they face no such constraints when it comes to forecasting the Retail Price Index. Which makes table 3.6 of the OBR Economic and Fiscal Outlook very interesting:
Look at the years 2014 – 16: RPI changes over time, much as you might expect – straying upwards somewhat. CPI remains miraculously at 2.0% in each year. Duncan has already noted how the OBR has implicitly said that the Chancellor’s growth strategy will have little effect. It also looks as though they’re dissing Big Merv.