Inflation drop gives MPC some breathing space

March’s fall in CPI inflation has given the doves on the MPC some welcome relief in the run-up to the Committee’s crucial May meeting. Granted, it is far too early to proclaim that the inflation threat has now passed. Indeed, inflation still looks set to rise over the next few months as the contributions of food and energy to the annual inflation rate build. But the drop in core inflation from 3.4% to 3.2%, as well last week’s weak pay growth figures, suggests that underlying price pressures are far from escalating out of control.