Carney faces balancing act with Inflation Report

Deflation will be the word on everyone’s lips at this week’s Inflation Report press conference. Mr Carney will need to emphasise that the Committee is alert to the risk that deflation becomes ingrained, but is also likely to argue that the period of deflation will be brief and benign. Given that there is limited scope for the Report to push interest rate expectations any lower, the greater risk would seem to be that the Governor’s comments come across as relatively hawkish.