Falling inflation may spark radical action from the Bank of England

It seems increasingly likely that the latter is the main result.

George Buckley, economist at Nomura, lists four key reasons for this disinflationary effect.

First, efforts to save businesses appear to have had some success, preserving the economy’s supply side.

Second, despite this, unemployment will rise and pay will fall or be constrained, reducing price pressures.

Third, as people and businesses anticipate lower inflation, it starts to come true – they are reluctant to raise prices or demand big pay rises.

Fourth, and perhaps most reassuringly for Bailey, low interest rates and persistent quantitative easing since the financial crisis have not led to the surge in inflation that was feared at the time.

More easing ahead

This means there is room to ease monetary policy further, if the Bank can find good ways to do it.

Traditionally, that would mean cutting interest rates. But they are at 0.1pc already, so the first step is to top up its quantitative easing programme.

Most people would struggle to spend £200bn in just a few months, but Bailey has managed it with aplomb. This pot of digitally created money, launched in March, will be exhausted next month if the MPC does not unveil more.

Two members of the nine-strong committee – Jonathan Haskel and Michael Saunders – last month voted for an extra £100bn of QE. This has been taken as a sign that the rest of the committee will follow this month.

It will help keep markets liquid, slosh money around the world of bonds, and keep downward pressure on interest rates.