The second bigger-than-expected fall in CPI inflation in as many months, from 4.0% in January to 3.4% in February probably won’t make the Bank of England sound any more dovish when it leaves interest rates at 5.25% tomorrow. But our view that inflation will fall below 2% in April and then ease towards 1% suggests the Bank may have to start cutting rates in the summer and reduce them to 3.00% next year rather than to 4.00% as expected by investors.
We’ll be discussing the outlook for Fed, ECB and Bank of England policy in a 20-minute online briefing at 3pm GMT on Thursday 21st March. (Register here.)
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