Both CPI and RPI inflation fell in May. The Bank has been way out, on the edge even of its ridiculous fan charts, for some time. In a more normal environment the pressure to raise interest rates would be extreme. Now at last there is a shroud of respectability in the constant predictions that inflation would fall off.
Now the writers of this blog are split. I am with the deflationists in seeing no move yet to high inflation (ultimately of course this is the policy goal of all major Western Governments except Germany faced with Chinese mercantilist policies), but with it building up in 2011 and 2012. As such my forecast has been for low rates until the end of this year and then a sharp rise, much more than will be comfortable through to 2013/14 or whenever the next bust begins.
Nick Drew and Bill Quango are far more of the view that the Bank of England is wrong and that inflation is here already to stay and can only go up - hence buying Gold and stocking up on baked beans.
We will see, but this is an interesting point, a return to inflation in the next 2 months will mean a rate rise, a continuation of the fall will mean rates staying ultra low, possibly well into 2011.
S overall, more bad news for savers and good for debtors.