§ Mr. Austin MitchellTo ask the Chancellor of the Exchequer what assessment he has made of the reliability of the governor of the Bank of England's forecasts of the rate of inflation. [18398]
§ Mrs. Angela KnightThe Bank published in its February 1996 inflation report an assessment of its forecasting record since it began publishing the inflation report in February 1993.
§ Mr. MitchellTo ask the Chancellor of the Exchequer what account he took of the potential impact of increases in costs outside the UK's control in setting his inflation target. [18397]
§ Mrs. KnightThe Chancellor took full account of this, and other factors, in setting the inflation target of 2½ per cent. or less. As he said in his 1995 Mansion house speech, events outside our control, such as sharp movements in commodity prices, could temporarily take us away from the objective. But setting interest rates consistently at the level judged necessary to achieve the inflation target should ensure that inflation will remain in the range 1 to 4 per cent. Since the Government started setting an explicit target for inflation, underlying inflation has averaged 2.6 per cent.
§ Mr. MitchellTo ask the Chancellor of the Exchequer what measures he has taken to monitor the accuracy and reliability of his method of calculating inflation. [18399]
§ Mrs. KnightThe Government's target for inflation is set in terms of underlying inflation—the retail prices index excluding mortgage interest payments. The RPI, which is compiled from a total of 120,000 prices collected each month from 146 locations throughout the UK is determined by recommendations of the Retail Prices Index Advisory Committee. The Office for National Statistics, which compiles and publishes the RPI, has in place a number of checks to ensure the accuracy and reliability of the index including auditing of monthly price collection, and regular updating of its coverage.