Inflation on a downward curve - what’s the future?

Staff at Bingham-Woods Indepedent Financial Advisors, Spalding.  Photo by Tim Wilson.
Staff at Bingham-Woods Indepedent Financial Advisors, Spalding. Photo by Tim Wilson.
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Inflation has fallen to its lowest 12-month rate on record as the oil price slump and falling food prices continue to cut living costs.

Consumer Prices Index inflation was just 0.3 per cent for the year to January 2015, beating the previous low of 0.5 per cent recorded in May 2000 and December 2014, according to the Office for National Statistics (ONS). 
The ONS says the reduction was driven by a 2.8 per cent fall in the cost of food and a 16.2 per cent drop in the cost of motor fuels, with petrol now at its lowest price since November 2009 and diesel since February 2010. 
Chancellor of the Exchequer George Osborne said: “Although the low inflation is, as the Bank of England confirmed last week, driven by lower food and energy prices, rather than damaging deflation, we will remain vigilant to all risks, particularly when the global economic situation is so uncertain.” 
Chief Secretary to the Treasury Danny Alexander added: “With record employment, strong growth, rising wages and low inflation, Britain has a golden opportunity to enjoy a long and sustained recovery. 
“There is still a lot more to do but this is solid progress on the road to a stronger and fairer society.” 
Meanwhile, Scott Corfe of the Centre for Economics and Business Research (CEBR) said: “Overall, this is good news for the economy. 
“Unlike in the Eurozone where there is a risk of a negative spiral of falling prices and weakening economic performance, the UK’s bout of deflation is expected to be short-lived and virtuous as the declining price of essentials increases household spending power. 
“As far as monetary policy is concerned, low inflation is going to lead to even more inaction from the Bank of England and the CEBR now expects the Monetary Policy Committee to keep the base rate of interest on hold until February 2016.”

Money Matters by 'Scott Woods.

Money Matters by 'Scott Woods.