UK inflation remains at zero; IMF hikes eurozone growth forecasts

Food and energy prices help to keep consumer prices index inflation unchanged, at the lowest rate since Macmillan was in No 10.

• Latest: IMF releases World Economic Outlook
• Full story: Inflation unchanged at 0.0% again
• Summary: Negative inflation avoided
• The key charts
• Introduction: Lowest inflation rate since SuperMac

5.24pm BST

Another mixed day for stock markets, writes Nick Fletcher, with European shares under pressure on continuing worries about Greece's finances as the latest deadline to reach a deal with its creditors approaches. Wednesday sees the latest meeting of the European Central Bank, with investors hoping an update on its quantitative easing programme will provide some support to the markets. But a revival in the mining sector saw the UK market buck the falling trend, while lower than expected US retail sales cast doubts again on an imminent rate rise from the Federal Reserve. The final scores showed:

4.07pm BST

Investors are seriously underestimating the dangers that Greece's potential exit from the eurozone would pose to the rest of the region, warns Paul Donovan of Swiss bank UBS.

He fears that the current rally in eurozone government bonds (which are now trading at record highs) has helped create a dangerous complacency.

The contagion risk after a possible Greek exit arises if bank depositors elsewhere in the Euro area believe that a physical euro note held "under the mattress" at home today is worth more than a euro in a bank - because a euro in a bank might be forcibly converted into a national currency tomorrow.

3.36pm BST

EU foreign policy chief Federica Mogherini doesn't share Olivier Blanchard's optimism that a Grexit would be manageable......

*MOGHERINI: GREXIT `COULD BE BEGINNING OF END' FOR EUROPE UNITY

2.53pm BST

Olivier Blanchard, the International Monetary Fund's chief economist, has just told reporters that the eurozone could cope if Greece quit the single currency.

Speaking at the press conference in Washington, Blanchard said that a Gexit would be very costly and painful, but not impossible to handle.

Interesting that IMF Chief Economist Olivier Blanchard just publicly stated that a #Grexit "could be done" & handled by the #Eurozone

2.40pm BST

If the IMF forecasts are accurate, then Britain will be the second-fastest growing advanced nation this year (having been the fastest in 2014).

Latest IMF growth forecasts for the major advanced economies. UK in second place. pic.twitter.com/9ySO6kvtKs

2.35pm BST

Here's the full forecasts just released by the IMF:

2.17pm BST

Here's another interesting chart from the IMF's new World Economic Outlook, showing the damage caused by the financial crisis:

IMF: Output Compared to Precrisis Expectations pic.twitter.com/2g1NTQMWAs

2.16pm BST

The IMF has also paid tribute to the European Central Bank, saying its QE stimulus programme appears to have "stalled the decline in inflation expectations".

But there's less love for Germany; just a nudge to do more to help its euro neighbours.

#IMF's new #WEO concerned "core economies" in eurozone not fiscally "accommodative" enough. Whoever could they mean? pic.twitter.com/8Swzv5nu6K

2.13pm BST

The IMF has good news for the eurozone -- it has raised its growth forecast for the region in 2015 to 1.5%, up from 1.2% previously.

It sees growth strengthening a little in 2016, to 1.6%. The weaker euro, and the fall in oil prices, should give European countries a boost, it believes.

The #IMF's just-released #WorldEconomicOutlook still has decent growth projections this year for #Greece pic.twitter.com/EWLV0tM9TV

2.04pm BST

Breaking: The International Monetary Fund has reiterated that global growth will pick up in 2015 and 2016, but warned that the recovery is "moderate and uneven".

* IMF increases growth forecast for Japan to 1 pct this year, 1.2 pct in 2016 - RTRS

* IMF cuts U.S. GDP growth forecast to 3.1 pct this year and next year, from 3.6 pct and 3.3 pct in January - RTRS

The IMF.... warned that the "complex forces" that affected global activity in 2014 - including wild swings in exchange rates and collapsing commodity prices - were still shaping economic events.

Longer-term issues have also depressed the "productive capacity" of many countries, the IMF said, including large debt mountains and ageing populations in Europe, Japan and the US.

Related: IMF forecasts faster global growth but warns of risks ahead

1.50pm BST

Heads up: The International Monetary Fund will release its latest assessment of the world economy in 10 minutes time.

Getting ready for the launch of the World Economic Outlook #WEO at 9 am ET. Follow live: http://t.co/gEJfJozXM6 pic.twitter.com/is2I7jALJF

1.44pm BST

Over to the US.... and the latest retail sales figures have just been released, and missed forecasts.

Granted, sales jumped by 0.9% in March - the fastest rise in a year. But the dollar is weakening, because economists had expected a bigger bounceback.

US retail sales up 0.9% in March (-0.6% in Feb), missing consensus of +1.1%, but still largest rise in a year

Fund Managers are now even more biased towards a 3Q lift-off, per BAML pic.twitter.com/m613wVhDwx

1.23pm BST

Time for a recap.

Britain has avoided falling into negative inflation for the first time in over half a century.

Consumer Price Inflation flat y/y in March according to @ONS. But another chunky drop in core inflation to just 1%: pic.twitter.com/r6FfaZz3sE

UK inflation steady at record-low zero percent in March http://t.co/FWAWp50NyB via @Reuters pic.twitter.com/cBqvLjSII7

Related: UK inflation holds at record low of 0.0%

12.51pm BST

Allan Monks of JP Morgan says there's a decent chance UK inflation will inch up this month:

With petrol prices having risen in April, the currency falling, utility bill cuts largely passed through, and global agricultural commodity prices having stabilized, headline inflation could rise to 0.1% in April even as core weakens.

We still see downside risk to our forecast for headline inflation, but March may have marked the trough in headline.

12.07pm BST

Greek finance minister Yanis Varoufakis will meet Barack Obama on Thursday, as the clock ticks towards Athens' next deadline.

Varoufakis is in Washington for the Spring Meetings of the World Bank Group and the International Monetary Fund. He is expected at the White House on Thursday to attend celebrations for the March 25th Greek Independence Day celebrations, becoming the first official of the recently elected Greek government to meet with the US president.

Sources say he will have a few moments to talk with Obama and US Vice President Joe Biden at a time when Greece is in crucial negotiations with its international creditors.

What are the odds @yanisvaroufakis will wear a tie to his meeting with @BarackObama? I say he won't. http://t.co/1OMIQpGvAg

11.47am BST

Back to Greece.... and European Commissioner Pierre Moscovici has told the European Parliament that he's still waiting for a detailed reform list from Athens:

#EU's Moscovici says need list of precise reforms from Greek gov't ~BBG | #Greece

Moscovici Says Need List Of Precise Reforms From Greek Govt "like pulling teeth out"

11.32am BST

One of the City's most pessimistic analysts, Albert Edwards of Societe Generale, has just warned that Britain's will face a currency crisis due to the large current account deficit.

Living up to his reputation as a 'permabear', Edwards' latest report claims the UK was a 'ticking time bomb".....

Albert's channelling 2010-era Bill Gross... pic.twitter.com/qkDT4KhMhc

Seven years later and Albert's still pushing the imminent collapse schtick... pic.twitter.com/eIJADlfem2

"sterling crisis" klaxon from Edwards. Gotta love election season. https://t.co/9Sk10FkvNM

11.25am BST

Here's my colleague Katie Allen on today's inflation data:

Related: UK inflation holds at record low of 0.0%

11.21am BST

It's a tale of two inflation rates, says former Bank of England policymaker Andrew Sentance:

Zero inflation in UK conceals big disparity between food and energy prices down by over 3pc on a year ago and services inflation of 2.4pc

11.08am BST

Today's inflation report contains bad news for motorists, who may have got used to paying less at the pump.

Falling inflation has largely been driven by falling fuel and food costs, and this should be positive for the economy. When the price of essential goods and services falls, it acts like a tax cut, boosting disposable incomes and allowing consumers to spend on other items.

[Bank of England governor] Mark Carney has described the impact of cheaper oil prices as "unambiguously good" for the economy.

10.57am BST

This is a rather neat chart from the Economist Intelligence Unit:

UK inflation since 2010: evident effect of falling prices of energy, food in last few months; imported price effects pic.twitter.com/cNqInGthWi

10.54am BST

High street sales helped to keep inflation at zero, points out Hannah Maundrell, editor in chief of money.co.uk:

"Today's confirmation that UK inflation has remained at zero is welcome news.....

Although we are expected to return to inflation in the not too distant future, we're facing uncertain times and it's likely our flirt with deflation is not yet over."

10.52am BST

Martin Beck, senior economic advisor to the EY ITEM Club, says Britain could be flirting with negative inflation for several months:

"We expect inflation to remain close to zero until the latter months of this year, at which point the base effects, caused by the collapse in oil prices, will begin to kick in.

But core inflationary pressures are likely to remain well contained, ensuring that inflation remains below the 2% target for a prolonged period. Therefore, while the threat of 'noflation' becoming entrenched looks low, there is equally little threat of inflation taking off.

10.47am BST

Inflation could turn negative by the summer, predicts Peter Cameron, assistant fund manager at Ecclesiastical Investment Management.

He's not worried, though:

"Inflation has remained at 0% this morning but could well fall negative in the next couple of months. The fall in inflation over the past year has been driven by declines in the prices of essential, everyday items like food and fuel. Therefore it is the equivalent of handing consumers a temporary tax cut through cheaper household bills. What we have not witnessed in the UK so far is the toxic form of deflation that occurs when people defer purchases of big ticket items on the idea that they will become cheaper in the future.

As long as that is avoided, these inflation figures should be considered a positive for the UK economy and also provide more wriggle room for the Bank of England when determining when to begin raising interest rates".

10.39am BST

Reaction to today's inflation data is flooding in, so I'll round up the best quotes now....

....starting with Joshua Raymond of City Index, who sees little chance of an interest rate rise soon:

Clearly the UK remains on the cusp of deflation and this continues to put the Bank of England between a rock and a hard place when it comes to hiking interest rates.

The threat of deflation is pushing market views for the BoE's first rate hike further out and whilst todays inflation reading will do little to change current forecasts, there were some fears we could see a deflationary print today.

10.34am BST

No prizes for spotting the trend:

Falling inflation not all about oil. UK & EZ core inflation falling for last 3 years. pic.twitter.com/QE1XyIkoOB

10.24am BST

The two main political parties didn't waste seizing on today's inflation figures.

Chancellor George Osborne (who saw the data yesterday) swiftly welcomed the news that CPI inflation remained at zero.

Our plan for working people gets another boost today with good news for family budgets - Inflation at zero for second month in a row.

"A few months of falling world oil prices won't solve the deep-seated problems in our economy or make up for years of bills rising faster than wages.

"Wages continue to be sluggish and are down 1,600 a year on average under this government. And tax and benefit changes since 2010 have left families 1,100 a year worse off on average.

10.18am BST

Britain's housing boom is slowing down, according to this morning's statistics.

The ONS reports that average prices rose by 7.2% year-on-year in February, compared with 8.4% a month ago.

10.15am BST

Newsnight's Duncan Weldon argues that deflation is not a threat:

Reasons not to worry about deflation in the UK: service CPI well above 2%, wage growth positive. Reasons to worry: core CPI now at just 1%.

10.02am BST

Hat-tip to Sky's Ed Conway for showing that UK inflation is at its lowest since the start of the swinging 1960s.

Not since 1960 has CPI inflation been as low as it is today. Historical chart based on @ONS numbers: pic.twitter.com/GCZyB3GnmV

10.00am BST

UK retailers usually hike the cost of cardigans and shoes in spring, but not this year..

The cost of clothing and footwear fell month-on-month in March for the first time since the consumer prices index was created in 1996, according to the ONS.

Clothing and footwear: prices, overall, fell by 0.1% between February and March this year, compared with a rise of 1.8% between the same 2 months a year ago. This is the first time that prices have fallen between February and March since the CPI was introduced. Normally prices rise as they continue to recover following the January sales period. The downward contribution came from price movements for a range of women's outerwear, particularly trousers, dresses and cardigans. There was also a smaller downward effect from men's outerwear.

9.51am BST

This chart from the ONS shows how inflation has rocketed towards zero in the last year:

9.45am BST

Cheaper food and energy prices are the main reason why inflation remained at zero last month.

The ONS says:

In the year to March 2015, food prices fell by 3.2% and prices of motor fuels fell by 13.7%. In both cases, the falls were smaller than in the year to February but the 2 groups still provided the largest downward contributions to the 12-month rate for March

9.40am BST

The pound has just fallen by half a cent against the US dollar, hitting $1.4614.

I reckon that is because Britain's core inflation, which strips out volatile factors such as energy and food, fell to 1.0% in March, from 1.2% 1.4% in February.

9.39am BST

The Retail Prices Index measure of inflation rose by 0.9% year-on-year in March, down from 1.0% in February. That's weaker than expected.

9.38am BST

DEFLATION! But it's not as bad as all that. CPI drops to minus 0.01% in March, the tiniest of negative readings. Officially it's still 0.0%

9.36am BST

Britain came extremely close to negative inflation, though.

The Office for National Statistics says that March's consumer prices index actually dropped by 0.01% - which it has rounded up to zero.

9.33am BST

UK ONS The Consumer Prices Index (CPI) was unchanged in the year to March 2015, that is, a 12-month rate of 0.0% #GBP #BoE

9.31am BST

Breaking: Britain has avoided falling into negative inflation.

Consumer price inflation remained steady in March at 0.0%, meaning prices were unchanged year-on-year.

9.26am BST

Just 4 minutes to go until we find whether UK inflation remained at zero in March or not....

9.23am BST

Greece's denial that it's preparing to default next month hasn't prevented its government bonds weakening this morning.

That's driving the yield, or interest rates, on its debt into even higher and more worrying levels:

Default risk climax RT @TradeDesk_Steve Greek yields (groundhog day): 10-yr 11.79 +21 5-yr 16.42 +79 3-yr 22.55 +121bp #Greece

9.15am BST

Weak inflation isn't just a British phenomenon.

Prices across the eurozone have been falling since December, and America's CPI rate also briefly dipped below zero in January. Why? Falling oil prices and sluggish economic growth get the blame.

In the 19th century there were as many years of falling prices as of rising prices, with the result that the cost of living was lower when the first world war broke out in 1914 than it had been when Wellington triumphed at Waterloo in 1815.

But since 1945, deflation has been considered yesterday's problem - in the UK at least. Japan, Sweden and the Czech Republic have all had periods of negative inflation, but the last time the published inflation rate went negative in Britain was in 1947. For most of the time, policymakers have been terrified at the prospect of an inflationary spiral, particularly in the 1970s and 1980s, when the annual increase in the cost of living rose above 20%.

8.49am BST

There will be a splurge of data at 9.30am, as the Office for National Statistics releases its latest survey of UK house prices alongside the inflation data.

We also get the latest Retail Price Index, another inflation measure that also includes housing costs. That's expected to have risen by 1.0% in March -- so no sign of deflation there....

8.38am BST

We probably shouldn't get too excited about inflation turning negative this morning.

A majority of City economists surveyed by Reuters reckon the Consumer Prices Index will remain unchanged in an hour's time, meaning inflation remained at 0.0% for the second month running.

"I don't think there will be deflation. The bigger picture is it is going to be close to zero for another two or three months. It is low inflation now - you might get a negative print, you might not, but it is not deflation."

8.29am BST

Today's inflation data will include the impact of a recent 5% price cut by British Gas.

That should bring utility bills lower, after years of inflation-busting price hikes helped to drive the cost of living up.

8.12am BST

Denial ain't just a river in Egypt, it's also the Greek government's standard response to most media reports these days.

The government, which is rapidly running out of funds to pay public sector salaries and state pensions, has decided to withhold a2.5bn of payments due to the International Monetary Fund in May and June if no agreement is struck, they said.

"We have come to the end of the road . . . If the Europeans won't release bailout cash, there is no alternative [to a default]," one government official said.

Greece denies reports in FT suggesting they are considering defaulting on debt if an agreement with its EU counterparts cannot be reached

Isn't Greece preparing for default if talks fail a bit like me deciding to get wet when getting caught in rain? http://t.co/1xC2mqaENd

8.03am BST

Today's inflation numbers will not improve the Bank of England's track record on hitting (or missing) its goals.

Since the financial crisis began, the CPI index has only enjoyed a passing relationship with the BoE's 2% target, as this chart from last month shows:

7.55am BST

Press Association have published a Q&A about the possibility of the UK inflation rate falling below zero today.

Has this ever happened before?

CPI has never turned negative since comparable records began in 1989. According to an experimental data series by the Office for National Statistics (ONS) going back to 1950 it was last negative, at minus 0.6%, in March 1960.

Yes. CPI at minus 0.1% would mean a basket of goods worth 100 a year ago is now worth 99.90. Low inflation has been driven by falling petrol and grocery prices.

Sustained falling prices could mean shoppers putting off purchases and firms delaying investment, while mortgages become less affordable, especially if wages drop. But this is thought unlikely, with temporary causes such as low oil prices likely to fade.

Coalition politicians will hope added purchase power creates a feel-good factor as well as boosting consumer spending and lifting the economy. But the boost to growth might come too late to affect first quarter figures out a week before the poll.

The Bank of England must try to return inflation towards its target of 2% so low CPI should mean rates at 0.5% for longer. Deeper or more prolonged negative inflation could create growing speculation of interest rates being cut even further.

7.46am BST

Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.

Is Britain experiencing its first bout of negative inflation since Harold Macmillan was running the country? We'll find out at 9.30am BST today, when the Office for National Statistics reveals the latest consumer prices index.

It is likely this will be a short-lived bout of deflation and the UK will returning to inflation later this year.

"While food price deflation of close to 4% year on year may sound extreme, this represents something of a relief after years of rapid price increases.

More specifically, over the seven years between 2007 and 2013, the average annual pace of increase in food price inflation was 5% per year. Enjoy the cheap food and fuel while it lasts!"

UK economy poised to welcome deflation for first time since 1960 - by me http://t.co/CaTKeJhFPC