LONDON: Summer clothing sales are expected to have pulled UK inflation back down to zero last month, bringing more relief to households and taking pressure off the Bank of England to raise interest rates any time soon.
Economists expect official figures published on Tuesday morning to show inflation on the consumer price index (CPI) measure dipping back to zero in June, from 0.1% in May. Some economists in a Reuters poll forecast prices could even be down on a year earlier, especially if there was widespread and early summer discounting on the high street.
The lowest forecast in the poll is for prices to be down 0.2% on a year earlier. That would mark a return to the negative inflation in April, the first instance in more than half a century.
Bank policymakers have appeared relaxed about inflation being well below their 2% target. The dip into negative inflation had been widely predicted, including by the Bank’s governor, Mark Carney, after a sharp drop in oil prices since last summer. He recently told Britons to enjoy the period of low prices while it lasts.
Economists agree that inflation is likely to rebound but say in the meantime the Bank’s monetary policy committee (MPC) can afford to take its time deciding when to start raising borrowing costs from 0.5%, where they have been for more than six years. Markets are not pricing in a rise until well into 2016.
