Inflation rate falls below zero

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 declined 0.1 percent in April from a year earlier, the Office for National Statistics said in London yesterday. Economists had forecast the rate to be zero, according to the median of 35 estimates in a survey. Core inflation slowed to 0.8 percent, the lowest since 2001. With inflation so far below the Bank of England’s 2 percent target, policymakers are under little immediate pressure 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 would be temporary and an expected pick-up in inflation at the end of the year meant the next move in borrowing costs would probably be an increase. “For now, it represents an obstruction to a Bank of England rate hike,” Alan Clarke, an economist at Scotiabank in London, said. “Enjoy it while it lasts, because there is a good chance that inflation will be back in positive territory next month.” The central bank forecast last week that inflation would average 0.6 percent this year and 1.6 percent in 2016. It would return to the 2 percent goal in the second quarter of 2017. – Bloomberg