UK's inflation rate falls to 0%

14 July 2015

monopoly money Inflation news now, and the rate of UK Consumer Prices Index inflation fell to 0% in June, from 0.1% in May, according to official figures. This is truly the Woodstock of our generation.

Drops in the prices of clothes and food were the main reason for the rate change, according to the excitable folks at the Office for National Statistics (ONS). Bank of England governor Mark Carney jumped in as well, saying breathlessly that he thinks inflation will remain low in the immediate short term.

Get a load of that!

The rate of Retail Price Index (RPI) inflation - which just so happens to include housing costs, like mortgage interest payments and council tax, was 1% in June, which is unchanged from last month.

"Inflation has continued its pattern of recent months, when prices have been very little changed on the previous year," said Philip Gooding from the ONS. "The headline rate for June has dropped very slightly on May, back to zero, thanks to small downwards effects from movements in clothing and food prices and air fares."

So, while this is good news for consumers, people who crunch numbers don't like long periods of negative inflation. They think it bad for the economy. The reason for that is, that people might not throw their money around, on the off chance that everything continues to get cheaper.

"The data therefore raise questions over the whether underlying price pressures are really picking up to the extent than the Bank of England is anticipating," said Chris Williamson, chief UK economist at Markit. "The Bank of England needs to determine whether pay growth will continue to accelerate as firms compete for staff, or whether low inflation will keep the overall rate of increase below levels that would normally worry the monetary policy committee into hiking interest rates."

TOPICS:   Banking   Economy

What do you think?

Connect with Facebook, Twitter, or just enter your email to sign in and comment.

Your comment