Is the UK in deflation or negative inflation? Q&A

UK inflation has fallen into negative territory for the first time since 1960, producing quite a few winners and lots of losers

Inflation in Britain has turned negative for the first time in more than half a century, giving a boost to household finances and bolstering expectations that interest rates will remain at a record low this year. What does it mean for your finances? And what is negative inflation, anyway?

Related: UK inflation turns negative

Deflation is a generalised and sustained fall in prices, not a brief dip into negative territory on the back of moves in the oil price or one-off factors such as the timing of Easter, which has played a role in these latest figures. If core inflation were falling it would be deflation."

The title of the ONS note 'UK enters deflation' released this morning suggests the UK statistics office put today's numbers in this category. However, we prefer to classify this as 'negative inflation', with deflation more strictly defined as a period of falling prices that are both sustained and general (i.e. not restrained to one or two sectors). Our own view is that this negative April print will not turn into a sustained run."

As the governor of the Bank of England said only last week, we should not mistake this for damaging deflation."

Despite inflation falling into negative territory, there is no real risk of a prolonged period of deflation in the UK. The underlying reason for low inflation over the past year has been the dramatic fall in energy prices, however oil prices have rebounded in recent months, which will put upward pressure on prices ...

Our forecast is that CPI inflation will approach 1.0% by the end of 2015 and reach almost 2.0% by early 2017."

The first period of negative inflation in over half a century could turn out to be the canary in the mine, signalling that there's something very wrong with the recovery."