Divyang Shah, Senior IFR Strategist
The report in February was intended to explain why the BoE was using the flexibility embedded in its inflation target to which the subsequent remit change was confirmation.
The May inflation report will attempt to point out that while there are credibility concerns the data on inflation expectations has been largely stable and of no real concern.
The objective is to continue to send soothing signals to allow the BoE maximum flexibility to act when Carney steps into the shoes as governor.
The combined easing by the major central banks has provided flexibility to the BoE in timing further QE.
While we still look for more QE from the BoE under Carney the timing remains uncertain but at the very least we expect a significant flattening of the front-end of the yield curve as the BoE looks to relay on forward guidance.
