Headline CPI figure of -0.1% is first negative inflation figure since 1960 fuelled by lower air fares and ferry ticket prices

Inflation in Britain has turned negative for the first time in more than half a century, giving a boost to household finances and bolstering expectations that interest rates will remain at a record low for the rest of this year.

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The Office for National Statistics said its consumer price index measure of inflation was down 0.1% in April from a year ago. That compared with the inflation rate at zero in February and March.

Negative turn

Statisticians said this was the first time the CPI had fallen since official records began in 1996 and the first time since 1960 based on comparable historic estimates.

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The fall in living costs will be welcomed by many as it means workers wages go further, after years when pay was falling in real terms. But for savers it means interest rates will remain low and there are also warnings that negative inflation is a symptom of underlying weakness in Britain’s economic recovery.

For now, the factors behind falling prices appear to be temporary, economists said. The main downward effect on price changes in April came from air fares and ferry tickets. That was probably down to the earlier timing of Easter holidays this year and so transport prices rose by much less this April compared with a year ago, the ONS noted. The largest upward effect came from motor fuels, which rose this April but fell between March and April in 2014.

The Bank of England had already forecast inflation would turn negative at some point this year but predicted it would soon pick up again. Economists agree there is little reason to fear the UK will fall into outright deflation, as seen between 1921 and 1933, which is regarded as a sustained fall in the cost of living, not a temporary decline below zero.

Facebook Twitter Pinterest George Osborne, says Tuesday’s negative inflation figures – the first since 1960 – are good news for families

Commenting on the figures, chancellor George Osborne said:

Today we see good news for family budgets with prices lower than they were a year ago. As the governor of the Bank of England said only last week, we should not mistake this for damaging deflation. Instead we should welcome the positive effects that lower food and energy prices bring for households at a time when wages are rising strongly, unemployment is falling and the economy is growing. Of course, we have to remain vigilant to deflationary risks and our system is well equipped to deal with them should they arise.

But Labour’s shadow chancellor Chris Leslie said there was little cause for celebration:

Any relief for households is welcome, but this month’s figures reflect global trends and doesn’t change the reality that many are still struggling to pay the bills. The Government must clearly guard against the risk that business investment might be deferred. We need stronger action now to raise productivity to deliver sustainable growth and rising living standards.

TUC general secretary Frances O’Grady saw the inflation figures as a sign of a fragile economy and said there were important implication for Osborne’s budget in July.



The first period of negative inflation in over half a century could turn out to be the canary in the mine, signalling that there’s something very wrong with the recovery. And with the threat of deflation set to continue, the Chancellor’s plans for extreme cuts risk putting the economy into more serious trouble.

Dear Chancellor...

Mark Carney wrote to George Osborne explaining why inflation was so far off the Bank of England’s government-set target. Photograph: Bank of England

The BoE has a government-set target for inflation at 2% and the governor, Mark Carney, has had to send open letters to Osborne explaining why the index is so far off the mark.



In the last letter, published a week ago, Carney said inflation should soon “pick up notably.” He reaffirmed that view after today’s figures, stressing that the decline was caused by last year’s big one-off fall in energy prices rather than weak domestic demand.



Carney told broadcasters:

We expect inflation to be very low over the next few months. But over the course of the year, as we get towards the end, inflation should start to pick up towards our 2 percent target.”



Economists were also quick to stress that the UK was not on the brink of outright deflation and noted the slowdown in inflation was largely down to global oil prices, which had tumbled but are now rebounding.

Reacting to the drop in prices, Alan Clarke, economist at Scotiabank in London said:

Enjoy it while it lasts because there is a good chance that inflation will be back in positive territory next month. The emphasis is largely symbolic and it shouldn’t have come as a surprise to most people.

Inflation well below the Bank’s target means Carney and his committee of policymakers are under little pressure to raise interest rates from 0.5%, where they have been for more than six years.

Ian Stewart, chief economist at consultants Deloitte commented: