July’s [B]UK Consumer Price Index[/B] is expected to show that inflation shrank for the first month since January while the annual pace of price growth slowed to 1.5%, the lowest in over 4 years. The Bank of England has said that CPI will fall below 1% at some point in the third quarter in its quarterly inflation report published last week. From there, Mervyn King and company expect inflation to be “unusually volatile”: upward pressure is seen as past changes in energy prices drop out of year-on-year comparisons and from firms’ continued adjustments to a weaker British Pound (as compared to the peak in late 2007); meanwhile, downward pressure is seen as rising unemployment depresses wages. The central bank concluded that “inflation is more likely to be below [the 2% target level] in the medium term [than above it]”. On balance, this broad accounting of what to expect in the coming months suggests that, barring a wild deviation from the forecast, the CPI result is unlikely to prove considerably market-moving having probably been priced into the exchange rate at this point. Indeed, with interest rates already at 0.5% and a 175 billion pound quantitative easing scheme firmly in place, lending growth figures (showing the degree to which aggressive easing is filtering into the broad economy) are far more important to gauge future monetary policy than inflation data.