Although inflation had firmed up a bit in February and March, its abrupt and significant retreat in April caused the MPC to lower the forecast path of inflation for 2017–18 from 4.5 per cent in H1 and 5 per cent in H2 to 2-3.5 per cent in H1 and 3.5-4.5 per cent in H2 in its June meeting.
Secondly, there must be a sufficiently stable long-term relationship between the demand for money and its determinants, such as prices, income, interest rates and wealth. I will go into this in more detail later on. In the third place, the monetary aggregate needs to have predictive powers as to future inflation. If it does, money growth can be a useful indicator of future inflation.