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Carney about to put pen to paper? – Rabobank

FXStreet (Barcelona) - Analysts at Rabobank comment that Mr. Carney will have to write the proposed letter to the Chancellor as the probability of inflation temporarily falling below 1% has increased in the near term.

Key Quotes

“With not much else to focus on, markets were fully concentrated on the release of the BoE’s Inflation Report, which was expected to bring downward revisions to both UK growth and inflation forecasts. Well, the Bank has lived up to this.”

“Owing to a weaker global backdrop –slower euro area growth in particular– and softer private sector domestic demand, the growth outlook for 2015 was adjusted from 3.0% to 2.9% (still above consensus and Rabo’s forecast of 2.5%), whereas lower commodity prices, a stronger pound sterling and substantial labour market slack pushed down inflation projections.”

“According to the MPC, there’s now a significant probability that inflation could temporarily fall below 1% in the near term, before gradually returning to its 2%-target only in 2017. If this materialises, Mr. Carney will have to write his first letter to the Chancellor, explaining why inflation is more than 1% off its target.”

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