Our model-based forecasts are complemented by judgment, which is supported by extensive consultations with companies and other contacts. Conditional on this economic projection, we choose a path for interest rates that will keep projected inflation on target or bring it back to target over a reasonable time frame.
At the end of each MPR we highlight several risks to our forecast – issues that require the Governing Council to exercise judgment. In principle, if one of those risks were realized, projected inflation would deviate from the target, and an adjustment to policy might be indicated.