Inflation forecast a risk to upside and downside

ON UK GROWTH

NEIL CUMMING, manager of PSigma UK Growth fund on UK Growth

Mervyn King has a headache. Forget the ‘Goldilocks’ economy; he cannot work out if the porridge is hot or cold. The MPC says its central inflation forecast is at risk both to the upside and the downside. However, it does not know which. A fragile recovery and spare capacity point to the downside, whilst energy prices, weak sterling and VAT increases point to the upside. So, for now, they are adopting a ‘wait and see’ monetary policy. Likewise, policy predicaments afflict a ‘hot’ Germany (in a ‘cool’ euroland) and the ‘hot and cold’ US. Following a thematic approach, we are tryin...