UK inflation back to zero as oil and food prices fall

Decreasing cost of crude oil, supermarket price war and cheaper clothing offers will boost the consumer
spending behaviour.
As there is a sharp fall in the prices of petrol and diesel has made the UK inflation back to zero in august as
tumbling crude oil prices trickled down to households. The sudden drop in inflation was mainly driven by
falling transport costs, as well as smaller increases in clothing and footwear prices than a year ago.
Authority figures demonstrated inflation on the customer price index edged down to 0.0% in August from
0.1% in July, proceeding with the trend subsequent to the begin of this current year of for all intents and
purposes no year-on-year ascend in living expenses. inflation has been underneath the Bank of England's
2% objective for as far back as 20 months.
Economists said the lack of inflation would continue to boost consumer spending, the main driver of
economic growth in the UK.
The headline rate was also in line with economists' forecasts, pushing up the pound against the dollar and
euro on Tuesday morning(15sept) as Bank of England may start raising interest rates after more than six
years at a record low of 0.5%.
The US Federal Reserve may hike its main interest rate this week, although experts believe the UKs
central bank will wait until at least early next year to follow suit.
The Bank of England governor, Mark Carney, has hinted at a possible move around the turn of the year and
said cheaper oil prices were positive for the UK economy as they boost household budgets.
Ian Stewart, chief economist at consultancy Deloitte, said the latest inflation figures pointed to more
support for consumer confidence. With the price of essentials like food, transport and fuel down sharply
on a year ago, inflation is flat on its back, he said.
However Dominic Bryant, an economist at BNP Paribas, said there were reasons to believe that core
inflation, which is one of the measures Bank policymakers have said they will monitor for signs of price
pressures, had now "bottomed".
"The drag on core inflation from the exchange rate seems likely to fade in the coming months. The
currency will still hold inflation back, but not to the degree it was earlier in 2015," he said.
The Trades Union Congress also raised concerns over the economic outlook. Zero inflation is not a route
to raising living standards, said the TUC general secretary, Frances OGrady.
The recovery cant be taken for granted and we need significant investment in skills, innovation and
infrastructure to boost productivity and ensure a sustainable economy that works for the many and not just
the few.
Submitted By:
Ishita Singh
S143F0015