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Marketnews.com:
MNI INTERVIEW: BOE Likely Understating Impact Of Sterling Fall

30 August 2019

LONDON (MNI) - The Bank of England risks substantially underestimating the upward inflationary pressure from sterling's depreciation due its practice of using trade weights to assess the impact of currency movements, a senior academic and adviser to lawmakers told MNI.
Dennis Novy, former trade adviser to the House of Lords and affiliated to the University of Warwick and the London School of Economics, stressed how much trade in the modern world is carried out in currencies that are neither those of the importing nor exporting country. This renders trade weighted indices, of the type used by the BOE, obsolete. If trade weights are used rather than invoicing currency weights, "you will underestimate the impact of exchange rate fluctuations on prices, on inflation," Novy said.
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