Low UK inflation is a good sign – as long as we don't reach permanent deflation
by Larry Elliott from on (#39PQ)
Disinflation sees consumer prices index fall to 0.3% thanks to drop in cost of crude oil and food but lower wages could make deflation a danger
Inflation is the lowest it has been in modern times. The cost of food and fuel is bearing down on the cost of living. Those on the lowest incomes are the biggest beneficiaries as stocking the fridge and heating the home gets cheaper. What's not to like?
Nothing at all, provided the rapid disinflation that the UK is experiencing does not turn into outright deflation. The distinction between the two is important. Disinflation is good news. It increases spending power and living standards by ensuring that prices rise less quickly than wages.
