Mervyn King is a moron, and I am very worried. Introducing the latest BoE Inflation Report, he delivers himself of the following tripe:
"In the light of futures prices for energy, food and other commodities, the Committee judges that a reasonable central view is that measured inflation will begin to fall back next year."
Elaborating, the Report states:
"The MPC’s central forecast is conditioned on futures prices for commodities, which are broadly flat. … Energy prices are assumed to evolve broadly in line with the paths implied by futures markets over the forecast period."
Saints preserve us ! Just because the word "forward" sounds just a teeny weeny bit like "forecast" - you know, two syllables, starting with F-O-R ? Would you care to check the evolution of past forward curves - for any commodity you like to mention - and subsequent spot-prices ? Forward curves are lousy estimators of future prices: if they were any good as estimators, who would ever need a hedge ?
Say after me, and then write out one thousand times: a forward curve is not a forecast. And then write out your resignation, in favour of someone who understands how markets work.