While the inflation numbers get the flashy headline, the Governor of the Bank of England has been speaking about banks hoarding all his QE cash.
What he's saying is pretty important because it signals the Governor's desire to push rates below zero:
“Of course people have talked about whether it would be sensible to reduce the rate at which those reserves are remunerated and it is something which we are looking at.
“I think we certainly would not want to reduce the rate of remuneration on a certain level of reserves, that is part of the framework, but above some normal level we could have a lower rate at which they are remunerated.
“That would not change the overall level of reserves in the banking sector, that is determined by our asset purchases. What it would do is perhaps make the banks work a little bit harder to try individually to convert some of those reserves into other assets.”
“If you just reduce the rate at which you remunerate reserves that won’t convert it into lending to businesses but it might mean that they would purchase more short term gilts for example which would be adding to the effective size of the asset purchase scheme.”
Remember, the Governor voted to increase QE by £75bn, but was out voted. He's clearly still worried about the output gap and inflation in the medium-term.
Will we see negative interest rates on certain bank deposits at the BoE? That depends on how MPC members revise their views on inflation in the light of today's numbers and the broader prospects for recovery.
For a variety of reasons, the deflationary threat has remained dormant.
But the MPC is now walking a fine line between wanting to get banks to lend and needing to reign in QE if and when the economy recovers.