Inflation Dips To 0% In UK

The consumer price index rate of inflation has dropped to 0% in June, this represents a drop from 0.1% in May.

The main reason for this change, according to the Office for National Statistics, was the decrease of food and clothing costs. Another factor was a lower increase to the cost of air fares in comparison to the same time last year.

The governor of the Bank of England has expressed a prediction for the rates to stay low for the near future but also says that it will go up around the end of the year.

The RPI (retail price index) inflation has remained at the same level in June as it was in May – a rate of 1%.

Philip Gooding of the ONS said:

“Inflation has continued its pattern of recent months, when prices have been very little changed on the previous year,”

“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.”

The CPI was lingering around 0% in February and then dropped to 0.1% in April – the first time it has been negative since records began.

The chief economist at Global Insight, Howard Archer, said that this new revelation was positive for the public.

“With earnings growth currently seeing clear improvement and employment high and rising, purchasing power is currently in rude heath,”

This 0% rate is far under the aim that the Bank of England laid out of reaching 2% by this point.

When you exclude products such as energy, food, alcohol and tobacco, you are left with what is referred to as the core inflation rate.  Figures now show that this has dropped to 0.8%, representing its joint lowest point since 2001.

“The data therefore raise questions over 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,” he added.

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