Deflation’ a genuine threat’

There remains a real prospect of deflation in the UK economy, an expert has suggested.

UK economist at Capital Economics Vicky Redwood stated that “underlying” trends should push the rate down further, despite the consumer prices index figure remaining unchanged in the past month.

Predicting a fall in the rate below one per cent before the end of this year, Ms Redwood added: “It could get down to zero or even negative figures towards the end of 2010 or 2011.”

This could lead to deflation unless the Bank of England carries out more quantitative easing, she remarked.

Consumers looking to get a lower interest rate on loans or credit cards could benefit from a situation of persistent low inflation, as this may allow the Bank of England to maintain the base rate at 0.5 per cent over an extended period.

Minutes of the Bank’s latest Monetary Policy Committee meeting saw the body split on how much to extend quantitative easing by.

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