There's something really surprising about UK inflation. It's not that it's now a percentage point above target. The big surprise is that it hasn't been this far above target before. Since 1997, the Bank has never had to write an open letter to the Chancellor, which it is obliged to do if inflation drifts more than a percentage point away from target.
This is strange because economists had thought such letters would be common. Back in 1998 Charles Bean - now the Bank's chief economist - wrote (pdf):
Open Letters would...be triggered more than 40% of the time. Open Letters would be a rarity only if aggregate demand...becomes significantly less volatile, and there seems no particular reason for expecting that to happen.
But it has happened. Though it's unclear why. James Stock and Mark Watson say (pdf) it's largely due to luck. But Bill Martin and Bob Rowthorn reckon it's because better monetrary policy has made inflation more sensitive to small changes in interest rates. And inflation's also been kept down by favourable supply shocks too; the entry of India and CHian into the global economy, and rapid technical progress in consumer goods.
There's another surprise. This stability in inflation and demand hasn't given us an obvious pay-off. It's trivial that stable inflation on average doesn't mean stable inflation for everyone.
Nor is it clear that stability is improving the UK's long-run economic performance - if you believe the Treasury. It forecasts (table A2 of this pdf) that output per hour will grow 2.25% a year from now on. This is no different from the 2.22% it grew during the unstable 1986-97 period.