UK inflation drops to all-time low in January
CPI measure of inflation falls to 0.3% thanks to falling fuel and food prices.
Annual UK inflation, as measured by the Consumer Prices Index, has dropped to 0.3% in January, according to the latest figures from the Office for National Statistics (ONS).
This is the lowest level since records began in 1989 and a drop from the 0.5% recorded in December.
The continued fall in the price of motor fuels is the biggest factor behind the slowdown.
But tumbling prices for food and alcohol as well as recreational activities and services have also contributed to the downward pressure.
Interestingly the ONS said the slowdown was partially offset by smaller price falls for clothing than is usual for the time of year. January is traditionally a big discounting period for retailers.
Last week the Bank of England predicted price inflation had the potential to turn negative in the short-term. However, it expected inflation to return to its 2% target within the next two years.
Good news / bad news
So it’s good news in terms of the weekly food shop and filling up our motors.
But it’s not great news for Bank of England governor Mark Carney, who faces having to explain the drop in a letter to the Chancellor George Osbourne yet again.
The drop also makes an interest rate rise less likely.
The base rate has been stuck at 0.5% since 2009. While that’s been good news for borrowers, savers have suffered from pitiful rates on their cash.
However, the drop in inflation at least means more saving options beat the cost of living at the moment, particularly interest rates on offer from current accounts.
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"But tumbling prices for food" can't say I've noticed. All I have seen is large rises in food over the last 5/7 years. This is heading for deflation which is a sure sign of a mauxed-up economy. Carney has no control whatsoever as the economy is way overloaded with more debt than it can handle. And the debt orgy continues like there is no tomorrow. They cannot make the decision to increase interest rates as that will cripple banks and the housing market. But watch out when they force themselves up. Things are about to get 'interesting', and I'm just glad I have zero debts.
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It's not good news for your weekly shop - it's just not bad news. If your weekly shop is a lot this week, it will be at least as much next week.
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20 February 2015