There are two sides to the coin on the recent softness in inflation
Core inflation has now fallen to just under the BOE's target of 2%, but as long as it doesn't fall further than that it should give comfort for the central bank to raise rates come August - and given that this will be the last of the inflation readings until then, it is likely the fall here won't derail the possibility of a rate hike.
But it will surely give the central bank more food for thought ahead of the meeting. The last thing they want to do is to hike rates now, only to reverse them several months down the road; particularly with the increasing possibility of a hard/no-deal Brexit in the picture now.
While the slowdown in inflation isn't helping the pound as it factors in the BOE decision, there is the other side of the story that also needs to be considered (but probably after the BOE decision is out of the way).
The slump in inflation is an indirect positive to household consumption as it means that there is some easing to pressures on real wage growth - and that will help with domestic demand to improve the economy.
The effects of such a scenario may take a longer time to pan out, but it is a welcome development by UK consumers and households - particularly after a miserable Q1 showing, where the annual reading for household spending was the weakest since Q1 2012.
So, while the soggy report earlier may harm the chances of a BOE rate hike in August, there is some upside to it in the sense that it should help lift some of the burden faced by UK households in due time.
For now though, focus of the market is all on the BOE so let's not get too carried away by the rhetoric here. Just something to keep in the back of your minds.
