For this relief, much thanks

As a general rule, the Bank of England only makes rate changes in months when it also issues an updated inflation forecast. Since those forecasts are scheduled for February, May, August and November, markets have been focusing on the May meeting of the Monetary Policy Committee as the likeliest date for the start of a gentle tightening cycle.

Today's news that consumer inflation unexpectedly slowed in March is likely to give Bank Governor Mervyn King the ammunition to persuade his more gung-ho colleagues to delay any rate increase at least until the August meeting. CPI slipped to 4.0% from February's 4.4% (still twice the target rate, lest we forget); the old RPI measure slowed to 5.3% from 5.5%; and "core" CPI slowed to 3.2% from 3.4%. According to the ONS, the slowdown in CPI was mainly the result of falling food prices, with a bit of an assist from air fares. (This latter may well have something to do with the timing of Easter, which is as late as it can possibly be this year).

It may be no more than a temporary reprieve. Energy prices are still rising: the Sterling price of oil recently hit an all-time record, which tells you something about the performance of the pound over the past three years, given that we are $30 or more below the all-time high dollar price for crude. More broadly, factory gate prices continue to rise at an alarming rate. Either these will be passed on to consumers at some point, or margins will come under severe pressure. More optimistic commentaries on today's numbers suggest that it may be the latter, that supermarkets and others are losing pricing power as consumers respond to the squeeze on incomes. But there's an alternative view, as expressed here by Jeremy Warner on the Daily Telegraph website:

Regrettably, the sort of inflation Britain has today is not “demand-pull”, where an excess of demand on limited supply pulls prices up, but “cost-push”, where increased costs push prices higher. On the costs side of the ledger, there’s no let up, from high energy and commodity prices, to growing wage inflation in the big manufacturing centres of China and the rest of the developing world. The terms of trade have turned seriously against the UK, with higher prices cutting ever more deeply into our standard of living.

There's something quite nostalgic about that: the last time I read the terms "demand-pull" and "cost-push" must have been in the late 1960s. Still, he's not wrong, and as long as monetary policy remains wildly expansionary, there will be a persistent risk that those cost pressures will permeate the rest of the economy. Mervyn King and the rest of the MPC can't start to relax just yet.