British inflation falls to lowest since 1989
The British annual inflation fell to 0.3% in January – the lowest level since the introduction of the records in 1989, the Office for National Statistics (ONS) said today.
The decrease of the consumer price index (CPI) last month, from 0.5% in December, largely due to cheaper oil and energy, as well as a decline in the price of food and some activities Leisure, said the ONS.
The Bank of England predicted on Thursday that British inflation could reach zero in the second and third quarter of this year, then come back and move towards the official target of 2%.
Governor Mark Carney assessed that “it is probable” that the CPI will fall even negative in 2015, as in the Eurozone, but is expected to recover later.
If low inflation, caused largely by the depreciation of oil, persists more than estimated, Carney will consider expanding the current economic stimulus program and will further reduce interest rates, which are at a historic low of 0.5 % since March 2009.
Also on that date, after the outbreak of the credit crisis of 2008, the Bank of England introduced a program to purchase public and private bonds worth 375.000 million pounds to pump money into the economy and revive credit.
If, as of the end of 2015, inflation rises more than expected -the bench projected to reach 2.15% in 2017, then the institution would consider accelerating the rate hike, the governor said.
The fall in inflation, whenever timely and controlled, is seen as something positive because it increases the purchasing power of the consumer at a time of low wages, but the authorities are vigilant about the risk of deflation.
In its regular report on the inflationary developments, the Bank of England notes that the current period of low inflation is “good for the economy” because “reinforces the purchasing power”, although follow developments closely if you need to pay “support” with monetary policy.
Carney, who had to write a letter to Finance Minister George Osborne to explain the reasons for the low inflation, also predicted that this year salaries will rise after years of decline or stagnation. He also said he hopes a “modest” global growth continues, despite the headwinds as the crisis in the Eurozone and the slowdown in the Chinese economy and others are emerging.
Contributed to this growth are falling oil prices and stimulus policies as applied by the European Central Bank (ECB), which will invest from March in 1.14 billion euros in bonds for buying public and private debt. Carney said that although a possible Greek exit from the euro would change the economic prospects of the UK, the impact would be “less” than would have been three years ago when the country was in a weaker position.
Thus, the British central bank maintains its forecast for economic growth this year at 2.9%, and has risen from 2.6% to 2.9% that of 2016, and 2.6% to 2.7% the 2017 (EFE)