The recent inflation figures released by the Bank of England have raised concerns about the institution's ability to control inflation. While the headline rate saw a slight decrease, the core rate of inflation actually rose, indicating a more persistent problem. This blog post will examine the reasons behind the Bank's inflation forecasting mistakes, highlight the potential consequences, and discuss the necessary steps to regain control. Transitory Inflation and its After-effects: The Bank of England and other central banks initially labeled the forces behind rising prices as "transitory." However, they failed to consider the lasting impact that transitory cost increases can have on wages and prices. Historical examples, such as the oil price shocks in the 1970s, demonstrate that transitory inflation can lead to persistent wage-price spirals. The failure to recognize this phenomenon is one of the key mistakes made by central banks. Neglecting the Money Supply and Over...