The central projection in the November Inflation Report implies that current monetary policy is the loosest – in terms of calibration to achieve the inflation target over the medium term – in the 12-year history of the Monetary Policy Committee. The forecast casts further doubt on last week's decision to expand asset purchases by another £25 billion to £200 billion.

In the August Report, the MPC projected that inflation would be 2.17% and rising in two years' time based on unchanged interest rates and £175 billion of asset-buying. A key issue in the run-up to last week's meeting was how the Committee could justify further easing against the background of this forecast.

Today's Report provides the answer: the forecast was ignored. The new two-year-ahead projection based on unchanged policy is about 2.3% (estimated from the fan chart). The increase from August is partly due to rolling the forecast forward one quarter but also reflects an upgrade to GDP prospects based on the lower level of the exchange rate and stronger global demand, as well as the further expansion of asset purchases.

At 30 basis points, the positive deviation of the two-year-ahead central forecast from the target is the most since the MPC's inception in 1997 – see chart. The previous largest excess, of 27 basis points, occurred in the May 2004 Report. The MPC raised interest rates in May, June and August 2004.

The MPC's remit is to set policy to achieve the inflation target "at all times". It might be justified to ignore two-year-ahead prospects if inflation were forecast to be persistently below target before or after two years. This, however, is not the case: the central projection is above 2% during the first half of 2010, below 2% between mid 2010 and mid 2011, and above 2% from the second half of 2011.

Another possible defence of current policy settings is that inflation risks are weighted to the downside. The Report, however, states that risks are balanced at the two-year horizon and an inspection of the fan chart does not suggest a significant downward skew to shorter-term forecasts.

The inconsistency between its forecast and last week's further easing poses a risk to the MPC's credibility. Markets, for example, may worry that the Committee is retreating from a pure focus on the inflation target, or placing more weight on avoiding an undershoot than an overshoot, although this would be in conflict with its remit.