IT'S A DEFLATIONARY EPOCH:

So, at the start of the year, an increase in the current U.K. bank rate of 0.5 percent was baked in. Now, the market is saying it'll be almost three years -- 30 months -- until Carney can pull the trigger. Indeed, market prices increasingly predict a rate cut by the end of this year. [...]

The global data, it must be said, don't back a rate increase. The European Commission slashed its forecast for euro-region inflation this year to just 0.5 percent, down from its November prediction for 1 percent and miles away from the ECB's 2 percent target. [...]

There are forces in the global economy today that are conspiring to hold inflation down. Those forces might cause inflation to return more slowly to our objective.

How does all this leave the Fed after its rate rise in December? I'd suggest that move increasingly looks like a policy error that might have to be reversed. The futures market now reckons there's just a 10 percent chance of a second increase when the Fed meets next month, down from a more than 50 percent likelihood at the start of the year...

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