NBR Inflation report – first take

Before we dig into the report the main news is yet again a downward adjustment of the inflation forecast. What I have done below is by no means a scientific analysis, is just a quick look at NBR’s track in forecasting short term and medium term inflation. I use the four Inflation Reports published during  a year and their forecasts for end of current year and end of next year.

First remark, NBR is very rigid when it comes to upward revisions Nov 2008 and Nov 2009.

Second, for the longer horizon NBR is more likely to revise the target down than up.

Third, short term , i.e. few months, NBR does a terrible job in estimating inflation either when it is surprised on the upside or on the downside.

Forth, the longer forecast is almost always at target.

Fifth, not in the picture but NBR is still searching for the optimal policy to bring inflation to target. So far, it has been a constant in its performance: missing the inflation target.

Dec-07 Dec-08
2007 Feb 4.7 4.1
May 3.7 4.2
Aug 3.9 3.7
Nov 5.7 4.3
Actual-07 4.84 Dec-08 Dec-09
2008 Feb 5.9 3.9
May 6 3.5
Aug 6.6 4.2
Nov 6.7 4.5
Actual-08 7.85 Dec-09 Dec-10
2009 Feb 4.5 3.2
May 4.4 2.8
Aug 4.3 2.6
Nov 4.5 2.6
Actual-09 5.59 Dec-10 Dec-11
 2010 Feb 3.5 2.7
May 3.7 2.8
Aug 7.8 3.1
Nov 8.2 3.4
Actual-10 6.09 Dec-11 Dec-12
2011 Feb 3.6 3.2
May 5.1 3.6
Aug 4.6 3.5
Nov 0 0

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