April’s sharp fall in CPI inflation led some to quickly conclude that this would be enough on its own to prompt the Monetary Policy Committee (MPC) into action. But a closer look at the figures suggests that much of the drop reflected the timing of Easter. As a result, inflation still look set to climb above 3% in the coming months. Despite this, we still expect more QE to be announced later this year. Mark Carney’s arrival at the Bank could prove to be a catalyst, while we expect the economic recovery to disappoint the MPC’s expectations. What’s more, lost in last week’s focus on the consumer prices figures were those on producer prices, which add to evidence that underlying price pressures are very weak.
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