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Slowdown in rate of inflation
Falling prices for motor fuels and food contributed to the slowdown in the inflation rate, the Office for National Statistics said.
In January, inflation as measured by the Retail Prices Index (RPI), fell to 1.1% from 1.6% at the end of last year. The RPI was last lower in November 2009 when it fell to just 0.3%.
Under the government’s preferred measure — the Consumer Prices Index (CPI) — the annual inflation rate fell to 0.3%, the lowest level since records began in January 1997. The CPI is used for uprating pensions and benefits.
Bank of England governor Mark Carney, in his introductory remarks to the Bank’s latest Inflation report, said inflation was “at its lowest level since the introduction of inflation targeting two decades ago”. It was likely to fall further in the short term and be close to zero for the remainder of the year, with the potential for a move into negative territory this spring. The Bank’s monetary policy committee estimates that two-thirds of the gap between the current inflation rate and the Bank’s target is explained by sharp falls in food and energy.
The balance of the gap from the 2% inflation target is the result of subdued generalised inflationary pressures. TUC general secretary Frances O’Grady said: “Low inflation is a sign of fragility in both the UK and global economy.”
www.bankofengland.co.uk/publications/Documents/inflationreport/2015/irspnote120215.pdf