Correction: Inflation Partly a Petroleum Phenomenon
A mea culpa. I posted a chart of UK inflation expectations last month which showed no decline in gilt market-implied inflation expectations with the decline in the oil price. I was puzzled that published forecasts of expected inflation did not show the same decline as the market data. The reason is that my data was wrong. Sorry!
In fact I had posted the chart which was based on data for the forward measures of inflation, which comes from a different sheet in the Excel spreadsheet which the Bank publishes for the yield curve.
The correct chart for implied RPI inflation over the next 2.5 years is:
By looking at the change in inflation expectations across different durations, we see that shorter-term inflation expectation have declined with the fall in the oil price:
Here is the comparison with the forward measure which I used by mistake in the old post; the green line is expected inflation over the period from today to 2018, the blue line is expected inflation over 2018 to 2021.