Inflation turns negative again

THE Consumer Prices Index (CPI) fell by 0.1% in the year to September 2015, compared to no change (0.0%) in the year to August 2015, official Government figures have revealed.

A smaller than usual rise in clothing prices and falling motor fuel prices were the main contributors to the fall in the rate.

The rate of inflation has been at or around 0.0% for most of 2015 and it had been widely expected that things wouldn’t have changed in September.

However, analysts are likely to take the view that today’s slight shift won’t result in the Bank of England hiking interest rates anytime soon.

Last week, the Bank said it did not expect inflation to reach 1% until spring 2016. 

Following the announcement, business leaders in Greater Birmingham said the Bank of England needed to forecast when it might alter interest rates. The Greater Birmingham Chamber of Commerce said firms needed time to prepare for such a development.

Paul Faulkner, chief executive of GBCC, said: “The small fall in inflation is not unexpected with CPI inflation having been low to non-existent in recent months. The continuing falls in petrol and diesel prices have been a particularly strong factor.

“We would urge the Bank’s Monetary Policy Committee to keep interest rates low in the mid-term and be very clear in any intentions to alter interest rates to allow businesses the time they need to prepare accordingly.”

He said while the fall was welcome news for many consumers, low to no inflation alongside ongoing global uncertainties, especially in the emerging markets, reinforced the chamber’s view that the recovery could still be fragile.

“Businesses have become accustomed to trading in a low inflation, low interest rate environment. Our latest QES for Q3 indicates interest rates and inflation remain less of a concern to businesses compared with other factors such as taxation and competition,” he added.