A report from the Office for National Statistics has stated that the Consumer Prices Index has remained at 0.1 per cent in October and in turn won’t see a rise in interest rates any time soon.
Earlier this month, the Bank of England said that the global economy was weakening, depressing inflation risks. This revelation has since had economists forecast the rates not seeing a rise until well into 2016.
In ONS’ latest quarterly Inflation Report, it said that it is highly unlikely that a rise to 1 per cent will happen until the second half of 2016, with two years before the targeted 2% will be reached.
However, the negative inflation offer a slight boost to the economy. Chief economist at Markit, Chris Williamson, commented: “The benefit of ongoing low inflation is not only that interest rates will stay lower for longer but that real wage growth remains robust, which will in turn continue to boost consumer spending power and help sustain the economic upturn.”
Mr. Williamson added that the deflation supports the Bank of England’s vision, which sees interest rates staying on hold until 2017, depending on whether or not oil prices and wage pressures are low.
Andrew Sentence, senior economic adviser at consultants, PwC, added that he expects the inflation rate to move up to “about 1% or higher” as fuel prices drop out of calculation over the next few months.
He continued: “Meanwhile, consumers continue to benefit from the combination of stronger wage increases and very slightly falling prices.
“The resulting increase in real wages and household disposable incomes should continue to be supportive of consumer spending and economic growth over the year ahead.”
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