UK Inflation Rate Falls To 0%

The Office for National Statistics has said that the UK’s inflation rate fell to 0% in August, which is down from the 0.1% in July.

The ONS has said that inflation, which is measured by the Consumer Prices Index, fell due to a smaller rise in clothing prices from a year ago and cheaper fuel prices.

CPI interest has been almost flat for the last seven months.

Inflation has not taken off, thanks to a drop in oil prices and the continuing supermarket war. You may remember that oil prices hit a six and a half year low of roughly $42.50 per barrel in August.

Figures from the ONS has also shown that the Retail Prices Index measure of inflation rose from 1.0% to 1.1% in July.

inflation

The rate of core inflation fell to 1.0% in August, from the previous rate of 1.2%.

Chief UK and European economist at IHS Global, Howard Archer, had this to say: “With consumer price inflation flat in August and core inflation easing back to 1.0%, there is little immediate pressure on the Bank of England to start raising interest rates. Further reason for Bank of England caution on interest rates is the recent evidence that the economy has hit a soft patch during the third quarter.”

The key interest rate from the Bank of England has been at 0.5%, a record low, since March 2009. However, many analysts believe that the Bank of England will begin to raise interest rates in early 2016.

David Kern, British Chambers of Commerce economist, said that the low inflation makes a strong case for keeping low interest rates.

“Low inflation supports living standards by boosting disposable income and will help to sustain the economic recovery. However, last week’s poor trade and manufacturing figures show that the recovery is still fragile, particularly in the face of major global uncertainties.”

However, some have said that despite the low headline inflation, price pressures remain in the economy.

Richard Jeffrey of Cazenove said while speaking to the BBC: “It’s coming through energy prices, petrol prices, diesel… [and] food prices. If you strip those things out, and you begin to look at domestically generated inflation, actually that seems to be rising at the moment.”