Great Britain's Inflation Rate Falls to Record Low

The inflation rate in the United Kingdom fell from 0.3% in January to 0% in February.

February's figure is the lowest rate of Consumer Prices Index (CPI) inflation since estimates of the measure began in 1988.

--BBC, March 24

The article quotes a senior economist who said the UK "took another step towards deflation." He added: "It looks likely the rate will drop below zero at some point in the coming months, and hover around zero for most of the year."

Bloomberg reports (March 24) that Bank of England Governor Mark Carney also expects the inflation rate to drop below zero in coming months.

The drop in the inflation rate to 0% in February took many analysts by surprise. Most economists had expected a rate of 0.1%.

One UK business group put a positive spin on the very low inflation rate. Read this excerpt from the March 24 BBC article:

Low inflation could support UK economic growth, business lobby group the British Chambers of Commerce (BCC) said.

"We remain convinced that there is very little risk of a long period of deflation," said David Kern, BCC chief economist.

"Inflation in the service sector, which accounts for 80% of the UK economy, remains firmly above the government's 2% target, and core CPI inflation in February was 1.2%.

"Together with higher earnings, lower inflation is boosting people's spending power, and will contribute to economic growth in the year ahead," he said.

Rain Newton-Smith, director of economics at business lobby group the CBI, said: "Despite inflation dropping to zero, it is unlikely we will see falling prices for a prolonged period, particularly as the pressure from lower oil prices fades."

You can read the entire article by following the link below: