You are here: Home - Household Bills - News -

UK inflation dips back to zero

Written by:
UK inflation dipped back to zero in August, down from 0.1% in July, according to the Office for National Statistics (ONS).

A smaller rise in clothing prices on the month compared with a year ago was the main contributor to the slight fall in the Consumer Prices Index (CPI).

There were also downward effects from falling motor fuel prices and sea fares.

Rising prices for soft drinks and for furniture and furnishings partially offset the fall.

Inflation has now been flat or negative for five out of the past seven months – a far cry from the Bank of England’s 2% inflation target.

“It is important to distinguish between disinflation – a slowdown in the rate of inflation; and deflation – a persistent and ongoing fall in prices,” said Maike Currie, associate investment director at Fidelity Personal Investing.

“The two are not the same thing. Both food and fuel – the main drivers of the historically low inflation numbers we are seeing – are two essential items. No-one is going to delay their weekly trip to the supermarket or stop filling up their car’s petrol tank, because they expect prices may fall next month. Deflation is dangerous because it causes companies and consumers to do the exact thing that causes more deflation – delay spending in the hope of further price falls in the future.”

Currie added: “With inflation virtually non-existent, the Bank of England is under even less pressure than the Fed to raise rates and sure enough last week’s meeting of the Monetary Policy Committee voted 8-1 against a hike on this side of the pond – pushing UK rate rise expectations as far out as August 2016.

David Lamb, head of dealing at the foreign exchange specialists FEXCO, said: “To be fair, there is little in this CPI figure to surprise the Bank. Falling oil prices have once again dragged inflation back to zero; but this is likely to be a short-term effect, and the Bank’s longer-term projections still stand. Gentle inflationary pressure should necessitate a rate rise only by the middle of next year.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape for summer, and moving your cash savings to a higher paying deal is ...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week

Read previous post:
Seven years on from Lehman: have investors returned to banking sector?

Today marks the seventh anniversary of the Lehman Brothers bank collapse. Graham Spooner, investment research analyst at The Share Centre,...