Professor Hashem Pesaran said that without important changes in monetary and fiscal policy, the likelihood of the Government meeting its inflation target without damaging the economy's growth prospects could be "rather low".
The professor's forecasts include:
An 80 per cent probability that inflation could be kept below the government target of 2.5 per cent in the short term.
The probability of maintaining inflation below 2.5 per cent over the next two years is at most 40 per cent. It falls to about 20 per cent, in the longer term.