UK Inflation Rate Falls To Zero

UK inflation rate fell to 0 per cent in February, the lowest since records began, official figures show.

According to BBC, lower prices for food and computer goods helped to cut the rate from 0.3 per cent in January, official figures show.

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

The drop in the CPI measure was sharper than many analysts had expected, with most expecting a rate of 0.1 per cent.

Ben Brettell, senior economist at Hargreaves Lansdown, said UK “took another step towards deflation” in February.

“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,” he said.

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 per cent target, and core CPI inflation in February was 1.2 per cent.

“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.”

However, she added: “With the Monetary Policy Committee still alert to the risk of very low inflation becoming entrenched, a rise in interest rates anytime soon seems off the cards.”

Last week, the Bank of England’s chief economist Andy Haldane said rates were as likely to need cutting as raising in the immediate future.