Business

UK inflation rate remains at zero in March

Shopper Image copyright PA

The UK's inflation rate remained at a record low of 0% in March, according to the Office for National Statistics.

Cheaper clothing and footwear, offset by a rise in petrol prices, helped to maintain the rate at 0% for a second month, official figures show.

The figure was the lowest rate of Consumer Prices Index (CPI) inflation since estimates of the measure began in the late 1980s.

It means the cost of living is broadly the same as it was a year earlier.

However, the ONS said that if the rate of inflation was calculated to two decimal places, prices were 0.01% lower than a year before - the first fall on record for the CPI measure.

One of the main reasons the CPI rate remained broadly unchanged was rising petrol and diesel prices between February and March, the ONS said.

But an overall fall in fuel prices over the past year has been a major contributor to low inflation, it added.

The CPI figure leaves inflation well below the Bank of England's 2% target.

There had been speculation that the CPI rate - as measured to one decimal place - would fall below zero in March, and there remains a possibility that the rate could fall in the coming months.

However, few economists think the UK is at risk of the type of entrenched deflation that Japan has suffered from.

"Inflation should start to pick up in the second half of the year, especially as the downward pressure from lower oil prices eases," said Rain Newton-Smith, director of economics at the CBI business group.

She added that falling prices had benefitted households, and lower oil prices had been good for businesses in general. However, North Sea oil firms had taken a hit from the fall in the price of crude.

Martin Beck, senior economic adviser to the EY ITEM Club, said he continued to expect the Bank of England "to wait until early 2016 before raising interest rates".

In March, inflation as measured by the Retail Prices Index (RPI) fell to 0.9% from 1.0% the previous month, the Office for National Statistics said.

Like CPI, RPI inflation is calculated from a sample of retail goods and services. However, RPI is calculated differently and includes data such as mortgage repayments.