Zero Inflation

Reuters are reporting here that the rate of CPI inflation in the UK fell to zero for February.

This is the first time this measure has reached zero since it was introduced in 1988.

It is worth saying that the underlying rate is still probably about 1-2% because the fact that the inflation rate has fallen to zero in the twelve months to February includes the effect of a very large drop in fuel prices which will probably turn out to be a one-off combined with well-above average  harvests which have driven down the price of food.

Nevertheless, provided that the inflation rate does not drop into significant negative territory - I suppose we would then have to start calling it the deflation rate - and since it is not associated with a collapse in demand (as deflation often was in the past, leading to recession) this means that we have price stability, which is a good thing for an economy and for most of the people of the UK.

The Beeb also now have the story here.

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