Inflation Steady At 0% Annual Rate In March

The annual rate of inflation has remained steady at 0% for the second consecutive month.

The Office for National Statistics said the consumer price index (CPI) measure remained at its lowest level since comparable records began in 1989 as transport costs rose - offsetting weaknesses in food and clothing prices.

Fashion costs fell between February and March for the first time on record, the ONS said, possibly reflecting changes to seasonal discount patterns.

Food and non-alcoholic beverages were 3% cheaper year on year in March, though this was a smaller decline than in the previous month.

Petrol costs rose as oil recovered a bit of ground following its dramatic collapse last year.

The ONS said fuel prices rose 3.8p between February and March, though they were still down sharply on the year.

It has been oil weakness and the effects of the supermarket price war that have driven inflation to the brink.

Some economists had predicted the CPI calculation would turn negative for March, showing prices falling on an annual basis.

While the governor of the Bank of England, Mark Carney, has welcomed the prospect of price falls for consumers and most businesses he has pledged to guard against the possibility of the UK entering a more entrenched period of falling prices, known as deflation.

Economists say deflation is unwelcome in any economy because it tends to delay purchases amid hopes the cost of goods and services will be cheaper in future.

Static prices have arrived at a time when wages are starting to grow following six years of inflation outpacing salary increases.

The last ONS figures on wages showed annual growth of 1.6% when the effects of bonuses were stripped out.

Mr Carney has been awaiting better news on wage growth as a pre-condition to raising the base rate of interest from its historic low of 0.5%.

But the inflation figures place the Bank's monetary policy committee under no pressure to act and most economists see no prospect of bank rate going up until next year.

The Bank has forecast a short period of negative inflation within months.

That is likely to be aided by figures showing that core inflation, a measure which strips out volatile factors such as energy and food, fell sharply to 1.0% in March,

The pound fell by half a cent against the US dollar, hitting $1.46, shortly after the ONS released the figures. 

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