Azernews.Az

By Bloomberg

Britain’s inflation rate fell below zero for the first time in more than half a century, as the drop in food and energy prices depressed the cost of living.

Consumer prices fell 0.1 percent from a year earlier, the Office for National Statistics said in London on Tuesday. Economists had forecast the rate to be zero, according to the median of 35 estimates in a Bloomberg News survey. Core inflation dropped to 0.8 percent, the lowest since 2001.

With inflation so far below the Bank of England’s 2 percent target, policy makers are under little pressure now to raise the key interest rate from a record-low 0.5 percent. Governor Mark Carney said last week that any period of falling prices will be temporary and an expected pickup in inflation at the end of the year means the next move in borrowing costs is likely to be an increase.

“Inflation is likely to remain close to zero in the near term before starting to trend up gradually from the third quarter,” said Howard Archer, an economist at IHS Global Insight in London. “Nevertheless, inflation is still only seen reaching 1 percent by the end of 2015.”

The pound extended its decline against the dollar after the data were published. It was down 0.7 percent at $1.5539 as of 9:31 a.m. London time.

Easter Holiday

The consumer prices index was affected by the timing of the Easter holiday, with air and sea fares having the biggest downward contribution to the annual rate. Food prices fell 3 percent in April from a year earlier, while fuels and lubricants plunged 12.3 percent.

The 0.1 percent annual drop in prices is the first since the official data series began in 1996. Based on an historical series constructed by the statistics office, it’s the first decline since 1960.

Retail-price inflation held at 0.9 percent in April, the lowest since November 2009.

Separately, the ONS said producer prices rose 0.1 percent in April and were down 1.7 percent from a year earlier. Input prices rose 0.4 percent on the month and were down 11.7 percent from a year earlier. Crude oil was the biggest driver of the annual drop.

House-price growth accelerated to an annual 9.6 percent in March from 7.4 percent in February, a separate report Tuesday showed. Values in London rose 11.2 percent from a year earlier.