Chart of the week: 14-20 May 2012

I’ve taken this week’s from the Bank of England’s latest Inflation Report.

In spite of unprecedented monetary stimulus, the Bank still expects CPI inflation to actually undershoot the 2% target in the next few years. I’ve previously suggested that this is because the Bank’s approach to quantitative easing has focussed on buying assets that are close substitutes for monetary base – which may have contributed to a lack of feed-through into broad money.

But other factors could also be at play – and I want to explore some of these in the next few days.

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