The Bank of England has once again confirmed that the level of consumer price inflation in the UK is currently at 0 per cent, in line with the record breaking figures announced in February. Although these figures have been tracked since 1989, there has been no record kept of deflation, but there has not been an overall fall in prices in the UK economy since March 1960.
The Bank of England’s announcement was much anticipated, but there doesn’t seem to be a huge level of concern about the potential for prices to stagnate in the short term, and they are not anticipating that this trend will continue for a significant period or have a knock-on effect on wages. The deputy governor of the bank, Ben Broadbent, has recently reassured interested parties saying that he does not see the period of deflation becoming protracted and believes that the chances of wider repercussions are slim.
A number of expert analysts agree with this assessment of the situation and are optimistic about the figures which could have a positive impact on the growth of the economy. The possibility of an ongoing situation of 0 per cent inflation could see markets agreeing that the BoE should strive to keep interest rates as low as possible even beyond the agreed timescale, currently the end of 2016. They believe that maintaining lower rates for longer could benefit economic expansion and welcome this week’s news.
The Association of Independent Professionals and the Self Employed’s quarterly Freelancer Confidence Index has shown that those who participated in the survey are inclined to agree, with most feeling generally positive about the performance of the economy. Over half described themselves as ‘more’ or ‘slightly more’ confident about way they expect the economy to perform over the next twelve months.
The Office of National Statistics have identified some of the main forces which are driving inflation downwards, including a fall in clothing prices and a cut in the cost of gas brought about by 5 per cent British Gas Cut which came into place in March. Net deflation has been staved off by a recovery in the prices of food and petrol, particularly in the wake of the supermarket price wars which drove down the price of motor fuel earlier in the year.
This could be better news than some independent professionals were expecting as predictions show that the costs of living are unlikely to increase significantly, but wages are set to stay relatively steady. In the face of pre-election uncertainty, maintaining the status quo is more than many had hoped for.
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