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Acting in the opposite direction, it appears that consumer-facing companies may have squeezed their margins by more than had been anticipated during 2009/10. The various changes to VAT during this period have also complicated the task of forecasting inflation. However, relative to the February 2009 forecast considered here, changes in VAT did not contribute significantly to the surprising strength of inflation in 2009/10, since the effects of the temporary reduction in VAT in December 2008 were included in that forecast, and the main impact of the more recent increase in VAT did not come through until the first quarter of this year. BIS central bankers’ speeches  3  thinking that the degree of pass through may be relatively limited, but by the start of 2010 that judgement was shown to have been wrong and we have incorporated close to full-pass through in forecasts since then. By contrast, the unexpected strength of inflation through much of 2010 largely stems from the surge in commodity prices. Could inflation remain high? To summarise: there’s no great puzzle as to why inflation has been above target for much of the past few years. Our economy has been subject to a series of large shocks – to oil and other commodity prices, to VAT, and to the sterling exchange rate – which have raised inflation. The scale of these shocks can more than account for the overshoot of inflation relative to target.