Update February 18, 2015

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UK inflation falls to record low of 0.3%

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inflation

A British customer in a fruit shop while inflation hit record low in British market

18 February 2015, Nirapad News: Britain’s annual inflation rate slowed to a record low of 0.3 percent in January on the back of plunging oil prices and lower food costs, official data showed on Tuesday.

“The Consumer Prices Index (CPI) grew by 0.3 percent in the year to January 2015, down from 0.5 percent in December,” the Office for National Statistics said in a statement. “Falling prices for motor fuels and food were the main contributors to the slowdown in the rate of inflation,” it added.

Inflation in Britain could meanwhile turn negative within months and interest rates cut, Bank of England governor Mark Carney said last week, signalling fresh risks to the economy before the country’s election.

While a sustained period of falling prices may sound good for consumers, deflation can trigger a vicious spiral in which businesses and households delay purchases, throttling demand and causing companies to lay off workers.

“As expected, UK inflation fell in January to 0.3 percent, its lowest level since the Office for National Statistics began to publish the Consumer Prices Index in 1997,” said Ben Brettell, senior economist at stockbroker Hargreaves Lansdown.

“Predictably, the main contributors were falling fuel and food prices. In the year to January food prices fell by 2.8 percent and fuel prices by 16.2 percent. Together these factors depressed the overall rate of inflation by 0.9 percentage points.”

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