UK inflation rate turns negative

The main measure of UK inflation turned negative in April for the first time on record- with the rate falling to -0.1%.

UK inflation rate turns negativeIt is the first time that the Consumer Price Index (CPI) inflation has turned negative since 1960, based on comparable historic estimates, the Office for National Statistics said.

The biggest contribution to the fall came from a drop in air and sea fares.

Bank of England governor Mark Carney said he expected inflation to remain very low over the next few months.

But Mr Carney added that “over the course of the year, as we get towards the end, inflation should start to pick up towards our 2% target”.

The latest inflation figures show that transport costs were 2.8% lower in April than the same time a year ago, while food was 3.0% cheaper.

Chancellor George Osborne said the inflation figure should not be mistaken for “damaging deflation”.

He added that the lower cost of living – driven by last year’s fall in oil prices – would be a welcome relief for family budgets, in an environment in which average wages were finally beginning to rise.

“Of course, we have to remain vigilant to deflationary risks and our system is well equipped to deal with them, should they arise,” Mr Osborne added.

The latest inflation figure means that a basket of goods and services that cost £100 in April 2014 would have cost £99.90 in April this year.

The last time we saw a price fall in the UK was March 1960, before even I was born, when there was a drop (probably) of 0.6%.

Almost nothing changed between March and April’s inflation figures- the ONS says that the thing that did move, which was the price of air fares and sea fares, was depressed by the timing of Easter.

The prices that are used to calculate the CPI are collected in a few days in the middle of the month. In 2014, Easter fell during those days, which meant transport fares were inflated.

This year it didn’t, so fares were lower, which means today’s tiny deflation may be seen as a technical effect.

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