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BCC: Slight Deflation Suggests No Interest Rate Change in Medium Term

  • The Consumer Price Index (CPI) fell by 0.1% in the year to October 2015, the same fall as in the year to September 2015
  • Upward price pressure on clothing, footwear and recreation goods was offset by downward price pressures for university tuition fees, food and tobacco, resulting in no change in the rate of inflation from September
  • Goods inflation in October 2015 was -2.1%, while services inflation was 2.2%

Commenting on the Inflation Figures for October 2015, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC) said:

“Inflation remained unchanged in October at -0.1%, continuing the trend of low inflation or negative price movements we have seen for much of this year.

“We expect this situation to continue in the next few months. Our forecast is that inflation will edge slowly up during 2016, but will remain below the 2% target until well into 2017. Low inflation boosts disposable incomes and supports living standards, which helps to sustain economic growth.

“However, recent economic data have also highlighted weaknesses in the UK’s manufacturing sector and the persistence of a large external deficit.

“Given this unsettled background, the Bank of England’s MPC should look to maintain low interest rates throughout next year.”

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