Belfast Telegraph

UK Website Of The Year

Home News UK

September CPI inflation expected to stay at zero again

Published 11/10/2015

Low inflation will help the Bank of England keep interest rates on hold
Low inflation will help the Bank of England keep interest rates on hold

Inflation is expected to remain at zero again when official figures for September are published this week.

The Consumer Price Index (CPI) measure of inflation has hovered near that level since February and was 0.1% in July.

Some economists, say there is a chance it may dip to 0.1% again this month for the second time this year, due to weaker food and petrol prices.

The latest inflation figures are due on Tuesday from the Office for National Statistics.

Low inflation eases pressure on the Bank of England to increase interest rates as it seeks to keep CPI from heading above its 2% target.

On Thursday the Bank of England's Monetary Policy Committee (MPC) voted to leave interest rates at 0.5%, and delivered some welcome news for households when it predicted that inflation would remain close to zero for longer, staying below 1% until spring 2016.

The MPC said UK growth was seeing a ''gentle deceleration'' since hitting a peak in 2014 and could continue to ease back if the global economy weakens.

It said despite recent stock market falls sparked by fears over the slowdown in China's economy, there had been ''few signs of a marked weakening in Chinese activity'' in recent data.

But it added that the slowdown in other emerging markets, such as Latin America, had been ''acute''.

The comments follow recent warnings from the International Monetary Fund that risks of a global financial crash had increased as the slowdown in China and potential US rate rises threaten the stability of debt-laden emerging economies.

In Britain CPI has been held back this year thanks to low oil and commodities prices, and by the strength of the pound, which makes imported goods cheaper.

The price war fought by supermarkets as they battle to fend off the threat of discounters Aldi and Lidl is also a major factor weighing on CPI. This has led to a period of falling prices for food and non-alcoholic beverages that has lasted for over a year.

Howard Archer, chief UK and European economist at IHS Global Insight, said: "Supermarkets remain heavily engaged in a food price war. Furthermore, a strong pound is limiting inflationary pressures, and sterling should remain relatively well supported.

"Inflationary pressures are very weak in the UK's trading partners as well, which should restrain import prices."

Your Comments

COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. The moderator will not enter into debate with individual contributors and the moderator’s decision is final. It is Belfast Telegraph policy to close comments on court cases, tribunals and active legal investigations. We may also close comments on articles which are being targeted for abuse. Problems with commenting? customercare@belfasttelegraph.co.uk

Read More

From Belfast Telegraph