CPI inflation remains in negative territory

The CPI rate of inflation remained unchanged at minus 0.1% last month.

The CPI rate of inflation remained unchanged at minus 0.1% last month. - Credit: PA

Inflation remained in negative territory last month, marking the longest run of flat or falling prices in more than 50 years.

The Office for National Statistics said today that the Consumer Prices Index (CPI) was unchanged at minus 0.1% in October as households continued to benefit from lower food and drink prices amid a supermarket price war, as well as sharply easing energy and fuel costs.

October’s rate of inflation means the UK has now been in mild deflation for two months in a row, with CPI having also briefly dipped into negative territory in April.

CPI inflation has been at or close to zero for nine months and is at the lowest level since March 1960.

The Retail Prices Index (RPI), a separate measure including housing costs, fell from 0.8% in September to 0.7% last month, the lowest level since December 2009.

Low inflation eases the pressure on the Bank of England to increase interest rates, with CPI having now been significantly below its 2% target for nearly a year.

However, the UK is not predicted to see a damaging spiral of persistent deflation, when widespread price falls become entrenched. The Bank of England expects inflation to return to the 2% target within two years, with its latest forecast suggesting a rate rise in the early part of 2017.

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Howard Archer, chief UK and European economist at IHS Global Insight, said: “Deflation is likely to prove brief and marginal and it is highly unlikely that consumers will be tempted to start delaying purchases in anticipation of falling prices.”

Chris Williamson, chief economist at Markit, added: “The benefit of ongoing low inflation is not only that interest rates will stay lower for longer but that real wage growth remains robust, which will in turn continue to boost consumer spending power and help sustain the economic upturn.”