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UK Inflation Rate Turns Negative Again

UK Inflation Rate Turns Negative AgainUK Inflation Rate Turns Negative Again

Inflation as measured by the Consumer Prices Index fell to -0.1% in September, official figures have shown, BBC reported.

The Office for National Statistics said that a smaller than usual rise in clothing prices, and falling motor fuel prices, were the main contributors to the drop in the rate.

There was also a fall in the price of household gas.

The CPI rate has been at or close to zero for most of this year. It was last in negative territory in April.

Food prices fell by 2.5% in the year to September in the wake of continued supermarket price wars. This means that prices in the sector fell for the 15th month in a row.

Meanwhile, petrol prices fell by 3.7p per liter over the year, and diesel prices - at 110.2p per liter - are at their lowest in close to six years.

The Retail Prices Index inflation measure fell to 0.8% in September, from 1.1% in August.

The official inflation figure from September has been significant over the years, as it is used as a guide when setting rises in various benefits, which take effect from the following April.

Chancellor George Osborne has already announced that a number of working age benefits, such as Jobseeker’s Allowance, child benefit and some housing benefit, will be frozen from April anyway, as part of a four-year freeze.

But other entitlements - such as public service pensions, as well as disability and careers allowances - will be set using the latest CPI figure as a template.

The law does not allow for a downrating of benefits, so the practical effect is that these benefits are likely to be frozen from April too.

The exact change, or lack of it, will be approved by the government in the coming weeks.

Meanwhile, the state pension will continue to rise faster than the current inflation rate. From April, the state pension will go up by at least 2.5%, owing to what is known as the “triple-lock” protection.

CPI inflation was expected to climb in the coming months, as the big drop in fuel prices would fall out of the year-on-year calculation

Financialtribune.com