Inflation remains negative for second month in October

Last week, the Royal Institution of Chartered Surveyors (Rics) warned that property would become “even more unaffordable” over the next five years, unless more houses were built.

The continued low inflation figures have pushed out rate rise expectations in the United Kingdom into next year. Overall consumer prices likely edged 0.2% above the level prevailing in October 2014, while the 12-month advance of the ex-food-and-energy measure probably held steady at 1.9%.

Muted inflation means that the prospect of a hike in British interest rates – which have stood at 0.50 percent for more than six years – is unlikely any time soon, economists say.

CPI stayed below zero as small rises in the prices of clothing and footwear last month were offset by ongoing falls in food and drink, while the effect of the Government’s move to triple university tuition fees, which came into effect in 2012, are also finally dropping out of the annual comparison.

The report said, “Between August 2015 and September 2015, the average cost of goods and services in the Consumer Price Index increased 0.3%”.

October marked the first time consumer prices have fallen on an annual basis for two months in a row.

The gap between the year-to-year growth rates of the headline and core CPIs is expected to have narrowed slightly during the reference period.

The Bank of England said earlier this month that the global economy was weakening, depressing inflation risks.

Maike Currie at Fidelity worldwide said Bank Governor Mark Carney expects inflation to remain below the 1 per cent-mark until the second half of 2016, and added that the United Kingdom could be in store for very low inflation and interest rates into the long term.

Chris Williamson, chief economist at Markit, said with inflation remaining at minus 0.1%, it helps “shore up the Bank of England’s belief that there’s no rush to start raising interest rates”.

“For now the UK’s weak inflation rate is largely due to external factors – persistently weak global demand and a strong pound pushing down commodity prices”.