Inflation drops to record low

17 February 2015

child saving money Inflation has dropped to a record low (even though figures only started in 1989) which is something to be cheerful of.

That'll lift the mood just before a General Election won't it?

The annual CPI fell to 0.3% according to official figures, down from December's 0.5%. So what does that mean to you? In real terms, it means that if you spent £100 on some shopping last year, right now, it will cost you £100.30.

The Bank of England think that inflation will turn negative for the first time in fifty-odd years within the next couple of months, which is exciting. That might mean things get cheaper for once (although, don't make any bets on it - retailers aren't that kind). In addition to that, economists reckon that their data crunching will show that wages actually rose by 1.8% in the three months to December.

George Osborne, naturally, cheered this news on, saying that it was a "milestone in the British economy." While this is good news, we need to see an upward trend beyond just food and fuel. It is a start though.

"There is certainly no sign of the systemic deflation that took a grip on Japan in the 1990s," said John Hawksworth, chief economist at accountancy firm PwC; "Domestic demand growth remains relatively buoyant."

Osborne added: "It's great news for families, whose budgets will stretch even further. It shows that those who went around predicting a cost of living crisis were plain wrong. And it demonstrates the clear choice between a long-term economic plan that's delivering stability and rising living standards, and the chaos of the alternatives."

TOPICS:   Banking   Economy

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