The pundits at the Adam Smith Institute believe the ‘wisdom of crowds,’ will be more accurate than the Bank’s official forecasts.
‘No individual can know enough about the economy to make a really reliable prediction about it,’ says Sam Bowman, Research Director of the Adam Smith Institute.
‘By combining the local knowledge of thousands of people, betting markets can out predict any panel of experts. If these markets catch on, the government should consider outsourcing all of its forecasts to prediction markets instead of expert forecasters.’
That probably wouldn’t be a bad idea, presuming what the government wants is an accurate forecast...
Surprise surprise, Carney won’t be at his local Paddy Power placing his bets today (unless he’s using their new mobile app to discretely vote on his phone), but is instead expected to make his speech at the University of Nottingham – a location perhaps designed to make him seem less London-centric. His reassurances that the interest rates will remain at rock bottom will come following weeks of speculation about the rates. Following several positive economic indicators, such as the storming services industry and upwards revisions of GDP, markets have started to believe the interest rates will rise sooner.
He is expected to reiterate his forward guidance that a rise in interest rates will not be an option until the unemployment rate falls from 7.7% down to 7% - something the Bank believes won’t happen until 2015.
‘He will try to counter the scepticism that has been expressed explicitly by the markets,’ said David Kern, chief economist at the British Chambers of Commerce.
‘Reassurance that interest rates will remain low is exactly what the doctor ordered.’
If you fancy calling Carney’s bluff and placing a bet down at Paddy Power, the odds at the time of writing are as follows:
UK Inflation on 1st June 2015
7/1 - 2% or Less
3/1 - 2.01 - 3.00%
9/4 - 3.01 - 4.00%
5/2 - 4.01 - 5.00%
7/2 - 5% or Greater
UK Unemployment rate on 1st June 2015
9/2 - 5% or Less
3/1 - 5.01 - 6.00%
15/8 - 6.01 - 7.00 %
5/2 - 7.00- 8.00%
5/1 - 8% or Greater