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UK falls into deflation

The Office for National Statistics revealed that inflation on the consumer prices index fell to -0.1% in April, following zero inflation in February and March. This is the first time Britain has dipped into deflation since 1960. Economists had forecast that inflation would remain at zero in April. A supermarket price war and cheaper petrol prices continued to push down on the headline inflation rate, despite the recent rebound in oil prices. Smaller increases in air fares due to the timing of Easter also contributed to the fall. However, most economists expect May's inflation rate to limb backup to zero or O.1%. Food prices fell 3% year-on-year in April, according to the ONS, while diesel and petrol costs fell by 12.3%. The Bank of England believes inflation will rise to 2.1% by the end of 2017, while the Office for Budget Responsibility does not believe inflation will reach the BoE's 2% target until 2019.

 

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