Below Zero: United Kingdom inflation turns negative again

The annual inflation rate, based on the official wholesale price index (WPI), was ruling at 2.38 percent in September, 2014. It’s expected to climb in the coming months as the big drop in fuel prices falls out of the year-on-year calculation, but core inflation, which strips out volatile components like food and energy, also remains weak at 1.0 per cent. The central bank, which is taking inflation into close consideration in determining the timing of an interest rate hike, said CPI was unlikely to reach one per cent until next spring.

The producer price index, a measure of costs for goods at the factory gate, fell 5.9% Y-Y, unchanged from the rate seen a month earlier.

Asian markets were all lower in response to the inflation figures, which came a day after data that showed imports fell for an 11th straight month in September.

“The corresponding 12-month year-on-year average percentage change for the urban index increased marginally from 8.6 per cent to 8.7 per cent”.

The index for primary articles (weight 20.12 per cent) rose by 0.4 per cent to 252.4 from 251.5 for the previous month.

Making the fourth cut in interest rates this year, the RBI cut the repo rate, at which it lends to commercial banks, by 50 basis points last month to bring it down to 6.75 percent.

“Overall, the still weak PPI highlights the severe overcapacity problem and sluggish domestic investment demand”, said economists at Nomura.

BOE governor Mark Carney said in August that he “wouldn’t be surprised if we have another month or two of negative inflation”.

According to Isarescu, there is no risk for Romania to enter deflation, although inflation will stay in the negative in the next three quarters, because of the rise in consumption which was already 6 percent in August and which could reach 10 percent by the end of the year.

Britain has unexpectedly veered back into deflation in September thanks to falling petrol costs, gas bills and High Street sales.

Still, with consumer inflation remaining well below Beijing’s 3 per cent target for the year, policy makers have ample room to unveil further support for the economy.

Clothing and footwear prices rose by 2.8pc between August and September this year compared with a rise of 4.0pc during the same period last year.