Deflation hits deeper doldrumsEconomy shrank even further in April

19 May 2009

Inflation calls to minus 1.2%

UK deflation moved into record territory last month, official figures showed today.

The headline retail prices index (RPI) fell from minus 0.4% to minus 1.2% in April, the Office for National Statistics (ONS) said.

The RPI turned negative for the first time in almost 50 years in March and is now below the all-time low of minus 0.8% recorded in June 1959. 

Households paying out less

The fall reflects lower mortgage interest payments and house prices as well as recent cuts in gas and electricity bills.

The consumer prices index (CPI), which does not include mortgage and house prices and is used by the Bank of England to target inflation, fell from 2.9% to 2.3% in April, the lowest since January last year. Food prices also dragged CPI lower as falling vegetable and meat prices this year contrasted with rising costs a year earlier.

The RPI's move downwards follows the Bank of England's interest rate cut to an all-time low of 0.5% in March, bringing reduced mortgage payments for many households.

Fall should halt by autumn

RPI deflation should peak in September because after that, the dramatic rate cuts introduced by the central bank last year to tackle the financial crisis will begin feeding into the index.


© Press Association 2009

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