For the first time in fifty years, the UK inflation may fall below zero due to lower energy prices and the price war between supermarkets.
According to the Office for National Statistics, consumer price index fell to zero in February for the first time since 1989. Figures for March were expected to drop to negative values, the lowest levels in fifty-five years.
The March data on inflation showed disinflation to 0.2%. Some economists had projected negative growth of 0.1%.
In March, gasoline prices rose by 3.6% fueled by the recovery in global oil prices which are expected to strengthen inflationary pressure by 0.1%. This should compensate for a 5% drop in natural gas prices from the UK largest energy supplier and sluggish inflation in food prices. Fierce competition forces supermarkets to cut prices for essential products by an average of 4%.
In contrast to Japan's deflationary spiral which made people live with falling prices for twenty years, a period of deflation in the United Kingdom would be temporary, the Bank of England says.
