UK inflation forecast to stay at minus 0.1% for October

Inflation is forecast to remain at minus 0.1% for October when official figures are released on Tuesday.

According to a Reuters poll economists expect the October data to show that inflation, as measured by the consumer prices index (CPI), held at minus 0.1%.

Inflation has been at or close to zero for most of this year and first dipped into negative territory in April when prices fell for the first time in more than 50 years.

For most of the year inflation has been at or close to zero. Inflation first fell into negative territory in April – prices dropped for the first time in over 50 years.

Martin Beck at the consultancy Oxford Economics, was quoted by The Guardian as saying:

“Price growth is continuing to be depressed by the strong pound and cheaper imports. And the effect of the tripling of university tuition fees, which came into effect in 2012, will finally drop out of the annual comparison in October, taking, all else equal, 0.2 percentage points off annual inflation,”

Low inflation reduces pressure on the Bank of England to hike interest rates. Interest rates were left unchanged at 0.5% earlier this month, but the central bank dropped its forecast of UK economic growth this year to down to 2.7% from the previous figure of 2.8%.



Deputy Governor Nemat Shafik said: “A gently-rising path for interest rates would result in the economy moving towards full capacity and inflation coming back to target within a couple of years.”

He added: “The UK economy is still doing quite well: we are growing above trend; real household incomes are growing faster than at any time since the crisis; consumer confidence is strong and investment intentions are robust. But the outlook for the rest of the world is more sombre.”

UK and European economist at IHS Global Insight Howard Archer said:

“The UK may well have crept out of mild deflation in October primarily due to a reduced year-on-year fall in petrol and diesel prices.

“Consumer price inflation could well start inching up year-on-year from November.”

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