Yesterday economists said this is likely to be inflation’s lowest point before the pickup begins.
In October food inflation dropped to -2.7% from 2.3%, although clothing inflation rose from September’s -0.6% to 0.8%.
Neither Samuel Tombs, chief UK economist at Pantheon Macroeconomics, nor Ruth Miller, UK economist at Capital Economics, reckoned negative inflation is anything to worry about as they think the pickup will start from next month.
Tombs predicted CPI to reach 1% by March and 2% by the end of 2016. He said: “CPI inflation still looks likely to rebound over the coming months, giving the MPC the green light to start raising interest rates from the second quarter of 2016.
“The 0.5% negative contribution from petrol prices will disappear quickly as the anniversary of the plunge in oil prices is reached.
“In addition, the stability of global food prices this year points to food inflation turning slightly positive soon, boosting headline inflation by 0.3%.
“By this time next year, then, CPI inflation could be back to its 2% target.”
Miller said: “With inflation set to rebound at the turn of the year – once the anniversary of the sharp fall in oil prices is passed – we think that November should signal the end of this year’s second spate of deflation.
“We still think that the risks of a more serious, prolonged period of deflation are low. For now, negative inflation is a good thing, boosting households’ spending power.
“Nonetheless, we think that it will take a long time for inflation to return to target. So there is still very little pressure on the MPC to raise interest rates soon.”
