BOE Policy Makes Change Tune with U.K. Zero Inflation Threat

The two Bank of England policy makers pushing for an interest-rate increase dropped their call this month as inflation risks falling below zero. The pound declined.

In its first unanimous decision since July, the nine-member Monetary Policy Committee led by Governor Mark Carney forecast that U.K. inflation may drop to zero in the first quarter and there’s a “roughly equal chance” it could go below that level. Policy “could and would be adjusted” if needed to meet the 2 percent price target.

“The fall in near-term inflation might become more persistent if it lowered inflation expectations, pay and other cost growth in a way that became self-perpetuating,” minutes of the Jan. 7-8 meeting published today showed. There was a risk of “inflation persisting below the target for longer than previously expected.”

Bloomberg

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