Inflation drops back to 0%

Banking and Borrowing

Updated on 14 July 2015 | 3 Comments

Clothing and food price falls behind drop.

The Consumer Prices Index (CPI) annual measure of inflation dropped to 0% in June, down from 0.1% in the 12 months to May.

According to the Office for National Statistics (ONS), the main drivers of the fall were drops in clothing and food prices. While air fares went up, they were smaller rises than those seen a year ago.

The ONS pointed out that, historically, price movements for food and motor fuels have been some of the biggest causes of inflation. However, they have had the largest downward pull on inflation in each month so far in 2015 – in the year to June, food prices have fallen 2.2%, while motor fules have dropped a whopping 10.5%.

At the other end, there were no large price rises to offset those falls, returning the economy to so-called ‘noflation’, which we last saw back in March.

The Bank of England believes inflation will rise slowly towards its Government-imposed target of 2% over the next two years.

What it means for you

Inflation has remained very low, even dropping briefly into the negative, over the last few months. This means that the general cost of living is virtually unchanged from a year ago. So even if you haven’t had a payrise, you are at least no worse off.

For savers, it also means that getting an inflation-beating return is very easy – every account going pays more than 0%! However, rates are still less than inspiring. If you want to get the best possible return, read Where to earn most interest on your cash.

Compare savings accounts with loveMONEY

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