Waning inflation pushes the case for BOE to act sooner rather than later
Can the BOE afford to wait until May to act?
A full 25 bps rate cut is almost priced in by the May meeting already after the weaker UK inflation data earlier but the bigger question at the moment is, will that be too late?
The pound has dipped lower but maybe not as much as you'd expect on the weaker data as the rates market continues to see some modest chance of the BOE not choosing to act on 30 January - odds went up to ~58% now from ~47% yesterday.
I'm not entirely convinced to be honest. If the BOE needed a real push - regardless of any post-election data - to cut rates, weakening inflation pressures is a solid reason to do so.
The data reinforces the more dovish comments by policymakers recently and I reckon there is actually a strong chance that we could see a 25 bps rate cut this month amid the fact that inflation continues to fall - weakest reading since November 2016 today.
Looking ahead, the labour market data and PMI data next week are going to be huge for the pound as they will offer any final shifts in sentiment ahead of the BOE meeting.