Inflation stays at record low of zero in March
UK PRICES stayed flat in September, weighed down by cheap fuel and a lack of rebound in clothes prices after the January sales.
Inflation – as measured by the annual change in the consumer price index (CPI) – was zero per cent in March, according to figures released yesterday by the Office for National Statistics (ONS). It remains unchanged from February.
However, the ONS said that if the price change was calculated to two decimal places, prices were 0.01 percent lower than a year before, which would be first fall on record for inflation as measured by the CPI.
Clothing prices dropped by 0.1 per cent from February to March, the first time a fall between the two months has been recorded. Subdued gas prices also contributed, helping to reduce household bills.
Inflation has not been this low since at least 1989, when comparable data began. Core inflation – which excludes energy, food, alcohol and tobacco – dropped to one per cent from 1.2 per cent in February.
Some think the fall in core inflation will remove any temptation from the Bank of England (BoE) to raise interest rates early – they are expected to stay at 0.5 per cent until 2016.
“Weakness in core prices will undoubtedly keep the BoE on its toes and likely challenge any attempt at an early rate hike,” said economist Fabio Fois from Barclays.
Economists believe the figures will be good for consumers.
“Zero inflation is allowing consumers to increase their spending in real terms and we now have the most positive set of consumer spending indicators since before the financial crisis. That should help support UK economic growth, despite the impact of election uncertainty,” said former UK rate-setter Andrew Sentance, now senior economic adviser to financial services firm PwC.