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Home > UK economy tips into negative inflation

UK economy tips into negative inflation

8th May 2015 | Published by Henry

Britain has negative inflation for the first time in more than fifty years, according to the latest Consumer Price Index figures – the index used by The Office for National Statistics to measure inflation. In February and March, the rate was measured at 0 per cent and this fell by 0.1 per cent in April, to – 0.1 per cent.

The last time Britain had deflation was in 1960 when Lonnie Donegan topped the charts, a loaf of bread cost the equivalent of 5 pence and a house could be bought for £2,500.

Negative inflation means that the money in your pocket will go further because the cost of living is falling, rather than rising. It also means that interest rates are likely to stay at their record low for some time to come. This is bad news for savers but good news for borrowers, who will continue to enjoy cheaper borrowing costs.

Economists are calling the current consumer price index decline negative inflation rather than deflation, because the former is used to refer to a short term situation and deflation when it lasts for more than a month or two.

The Governor of the Bank of England, Mark Carney, expects Britain to have negative inflation for a brief period only, referring to it as a ‘temporary period of falling prices’ rather than something more damaging to the economy.

Mark Carney has said that this period of negative inflation is ‘unambiguously good’ for everyone. We all benefit from lower food prices and lower fuel costs. What’s more, spending less on petrol and groceries means that we have more spare cash to spend on other things which, in turn, is good news for the UK economy. Experts predict that the average householder will save £140 a year because petrol prices have fallen.

Category: Money
This post was written by Henry
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