Member Article

Osborne quells fears as inflation plummets to 15-year low

The annual rate of inflation has hit a 15-year low as oil costs fall and supermarkets wars continue.

According to Sky News, Chancellor George Osborne is expected to tell Britons to enjoy the low inflation rates and not be frightened by it.

In a speech at the Royal Economics Society today, Osborne is expected to say: “The low inflation we see here in the UK is much more welcome than in the eurozone where inflation has been very low for some time and is now negative.

“There the debate has understandably turned to the dangers of deflation - the risk of a self-reinforcing spiral where economic activity falters, consumers defer purchases as prices fall and nominal debt burdens become ever harder to manage.”

The Office for National Statistics (ONS) measured consumer price inflation (CPI) at 0.5% in December - its joint lowest level on record - slowing from a rate of 1% in the previous month.

The figure represents an increase in consumer spending power, a further easing in the cost of the living wage and increasingly competitive retail prices.

The biggest factor to last month’s inflation dip was falling petrol prices and lower gas and electricity bills compared with a year earlier, ONS said.

Food and non-alcoholic beverages were 1.7% cheaper in December than the same month a year ago - driven by the ongoing price war between the major supermarkets.

The dip in CPI to below 1% triggers a letter of explanation from Bank of England governor Mark Carney to George Osborne, as it is more than 1% off the Bank’s 2% inflation target.

The Bank had previously said it expected CPI to fall below 1% and remain there for months to come.

Shadow Treasury minister Shabana Mahmood said: “Plummeting global oil prices are the reason why the rate of inflation is falling here in Britain.

“But wages continue to be sluggish and the squeeze on living standards since 2010 means working people are £1,600 a year worse off under this government.”

This was posted in Bdaily's Members' News section by Ellen Forster .