Inflation turns negative

RETAIL Price Index inflation has turned negative for the first time in nearly 50 years, official figures confirmed today.

RETAIL Price Index inflation has turned negative for the first time in nearly 50 years, official figures confirmed today.

The RPI measure of inflation fell to minus 0.4% in March, having already hit 0% the previous month, according to data from the Office for National Statistics.

It is the first time the figure has been in negative territory - representing an overall fall in prices - since March 1960.

The Consumer Prices Index - the measure used by the Government in its inflation target of 2% - also fell last month, from 3.2% in February to 2.9%.


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CPI inflation is expected to continue to fall sharply, as last year's steep increases in energy prices are replaced by price cuts, but is expected to remain in positive territory, so sparing the economy from the worst effects of full-blown deflation.

However, the negative RPI - largely the result of lower mortgage costs following successive cuts in interest rates and the Bank of England seeks to combat the recession by stimulating economic activity -could have serious consequences for many.

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RPI is the basis for the calculation not only of state pensions and many benefit payments but also for index-linked savings and annuity rates for private pensions. It is also widely used as a benchmark in private sector wage negotiations.

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