UK interest rate remains at zero for second month

Inflation in the UK remained at 0 per cent, a record low, during March, according to figures from the Office for National Statistics.

The 0 per cent rate was maintained for a second month by a drop in prices of clothes and footwear and a rise in petrol prices.

The figure was calculated using the Consumer Prices Index (CPI) and was the lowest inflation rate since the measure was first introduced during the late 1980s.

A 0 per cent inflation rate means that the cost of living has not risen during the last twelve months. However, the ONS has said that when inflation is calculated to two decimal places, prices are actually 0.01 per cent lower than they were a year ago, a fall for the first time in the CPI’s history.

Rising diesel and petrol prices have meant that inflation has remained relatively stable during February and March, although falling fuel prices have been largely responsible for low inflation over the past year.

The CPI figure for inflation is well below the government’s target rate of 2 per cent.

Experts speculate that the rate could fall still further in the coming of months although few predict that the UK will see a similar level of inflation to that of the Japanese economy. Rain Newton-Smith, director of economics at CBI business group, believes that inflation will begin to rise again during the second half of this year, particularly once fuel prices begin to recover.

Senior economic advisor, Martin Beck, said that he expected the Bank of England to wait until early 2016 before it raised interest rates.

An alternative method for calculating inflation is the Retail Price Index, which includes rises and falls in mortgage repayments, retail goods and services. The RPI also fell during March, down to 0.9 per cent, from 1 per cent in February.