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UK interest rates will stay unchanged at 0.5% after the Bank of England rate-setters voted 8-1 for no change.

Ian McCafferty, who is one of four external members of the Monetary Policy Committee (MPC), was outvoted by other members but has voted for a quarter-point rise at the past four meetings.

The nine rate-setters on the MPC have predicted that inflation would stay below 1% until the second half of 2016 and will be slightly positive in November despite it standing at -0.1% in October, as measured by the Consumer Prices Index (CPI).

The European Central Bank worked towards boosting the Eurozone economy last week when it cut its overnight deposit rate and extended its €60 billion stimulus programme by six months.

The current members of the MPC have not been part of the committee when rates have been previously raised or cut but the Federal Reserve in the US is expected to raise rates at its policy meeting some time next week.

After months of UK inflation staying at 0% it has risen to -0.1% in September, official figures have shown.

The main reasons for this is because a smaller than usual rise in clothing prices and falling motor fuel prices, according to the Office for National Statistics (ONS).

There was a fall in price of household gas and the CPI rate has been close to zero for the majority of the year and it was in negative territory in April.

The chief economist at the British Chambers of Commerce, David Kern, said that they had expected inflation would stay at or below 0% for the rest of the year.

Due to the ongoing supermarket price wars, food prices fell by 2.5% in the year to September and as a result, prices in the sector fell for the 15th month in a row.

Both petrol and diesel prices are at their lowest in six years. Petrol prices fell by 3.7 pence per litre over the year.

In September, the Retail Prices Index (RPI) inflation measure fell to 0.8%, compared with 1.1% in August. 

 

 

The Bank of England is holding UK interest rates at a record low of 0.5% and the Bank’s Monetary Policy Committee (MPC) voted 8 to 1 to keep rates the same.

UK interest rates have remained unchanged for over six years and Ian McCafferty, a committee member, disagreed and voted for a quarter-point rate rise for a third month in a row.

Inflation will stay below 1% until spring 2016 and cost pressures in the UK’s labour market is rising too slowly for inflation to return to the Bank’s 2% target, the central bank said.

Although inflation has stayed around 0% for a few months, the Bank indicated that the fading effect of last year’s oil price falls and robust domestic growth would cause it to increase to 2% next year.

UK inflation rose in July with the Consumer Prices Index (CPI) measure rising to 0.1%. In June, the percentage stayed at 0% and the Office for National Statistics (ONS) stated that the main reason that inflation rose is because of the lower prices of clothing.

However, the Retail Prices Index measure of inflation has stayed the same at 1% and this will be used to calculate rail fare increases. The fares will remain the same until next year.

For the last six months, CPI has been almost flat and turned negative in April. This is the first time since 1960. CPI inflation strips out increases in energy, food, alcohol and tobacco. In addition to this, the underlying measure of CPI inflation rose to 1.2% in July, which is a five-month high. The ongoing supermarket price war could be the reason that CPI was held back, with a 2.7% year-on-year fall in the price of food and non-alcoholic drinks.

Taking all this into consideration, there has been question over when the Bank of England might raise interest rates. The Bank has a target inflation rate of 2%.

In the past two months, the drop in the price of oil has fallen by nearly a quarter, which is why analysts have said that the inflation rate could fall back again.

Last month the annual rate of house price growth fell to a two-year low, stated the Nationwide building society. In June, annual house price inflation fell to 3.3%, compared to 4.6% in the previous month. This is much lower than two years ago, when prices were rising by 11.8%.

The average cost of UK property now stands at £195,055 because between May and June, prices across the UK actually fell by 0.2%. House prices in Wales and Scotland however, have fallen over the last year.

Howard Archer, who is the chief UK and European economist at IHS Global Insight, said that he still expects that house prices will rise by 6% this year and 5% the following year. Northern Ireland has the fastest growth, as he region saw its prices rise by 8% over the year. London house prices rose by 7.3% and in Scotland, prices fell by 1% compared to one year ago. In Wales, prices were down by 0.8%.

Negative inflation has turned positive this month because transport costs have helped the UK inflation rate to increase. Inflation stood at -0.1% in April but recently rose to 0.1% in May, as measured by the Consumer Prices Index (CPI).

The Office for National Statistics (ONS) reported that transport, in particular air fares, are the biggest contribution to the rise. However, although this was the main factor, other reasons are taken into account such as the rise in food and petrol prices during May. Despite these rises, the prices were still lower than a year ago.

When CPI turned negative in April, this was the first time it had done so since 1960. The food and fuel prices have had an effect on the rise in inflation and pulled down the rate by about 0.5 percentage, however this was less pronounced than the month before because the prices then had a negative effect of 0.7 percentage points.

Mark Carney, who is the Bank of England governor, said that he expects UK inflation to continue to be low in the short term. The Bank also expects near-zero inflation, which will help the UK economy by improving the spending power of households.

The Bank of England has cut its UK growth forecast for 2015 from 2.9% to 2.5% and for the next year, 2.9% to 2.6%, governor Mark Carney revealed in his quarterly inflation report. Despite this, the UK is still a country with one of the fastest growth rates in the developed world.

Deflation could emerge during the year, but inflation was expected to pick up towards the end of the year, Mr Carney also commented. In March, inflation was at 0% for a second month in a row, which is well below the Bank’s 2% target.

The figure marks the lowest rate of Consumer Prices Index inflation since estimates of the measure was first brought into effect in 1998. To add to this, for over six year the Bank’s base rate has been at a record low of 0.5%.

Mr Carney blamed falling inflation on a sharp fall in energy prices, decreasing food prices and strong sterling. He also said that these factors explained about three-quarters of the fall in inflation. Inflation should return to its 2% target within two years before rising above this, he said.

In terms of wage growth, the Bank lowered expectation in 2015 from 3.5% to 2.5%. The Bank did not give a positive reaction to productivity growth as it sees a disproportionate number of new jobs as low skilled and low-output. In the coming year, productivity growth is forecast to improve modestly before remaining below past average rates.

The latest statistics from the Office of National Statistics (ONS) the UK inflation rate has remained at a record in March.  The ONS said consumer prices rose 0.2 percent between February and March but compared with a year earlier, prices were unchanged, in line with economists’ forecasts.

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Inflation has not been this low since 1989 when comparable data began.  The prospect of falling prices is unlikely to draw a policy response from the Bank of England to raise interest rates early, these are expected to remain at 0.5% until 2016.

Clothing prices dropped by 0.1 percent from February to March, this is a first time a fall between the two months has been recorded. Subdued gas prices have also contributed, helping to reduce household bills along with the overall fall in fuel prices over the past year.

With inflation staying at a low consumers are increasing their spending.

The British Retail Consortium said the value of total retail sales in March was 4.7 percent up on a year earlier, the biggest year-on-year rise since April 2014, and much stronger than the 1.7 percent growth recorded in February.

So good news for shopaholics then and for retailers in Hastings and the surrounding areas too.