Inflation surprise for the UK

The CPI has lifted 0.2 per cent, leading Bank of England Governor Mervyn King to write a letter to Chancellor Alistair Darling to explain why it’s above the 2 per cent target.

The RPI was expected to fall into negative territory but it’s dropped from 0.1 per cent to 0 per cent.

Tony Dolphin, senior economist at the Institute for Public Policy Research, comments: “With the retail prices measure of inflation falling to zero in February, the UK narrowly avoided its first experience of deflation (falling prices in year-on-year terms) since March 1960.

"Inflation was widely expected to fall below zero in February but was prevented from doing so by bigger than expected increases across a range of goods, including furniture, clothing, recreational goods and footwear. This probably reflects higher import prices – the result, in part, of sterling’s decline over the last 12 months. The same factors were also behind the rise in inflation on the consumer prices measure.”

Read why you shouldn’t panic about deflation hereRelated articlesRunning a business just got cheaperKing gives dour assessment of UK economyPicture source

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