U.K Consumer Price Index fell 0.1 percent below zero for the second time since 1960, reflecting a weak price backdrop that the Bank of England (BOE) warned will keep inflation below 2 percent target up until spring 2016.
Although, the data released last week shows that manufacturing production is growing at 0.5 percent but inflation remains far below the Bank of England’s target. This figure further reaffirmed that the BOE is still months away from raising the interest rate from its record-low 0.5 percent.
While core inflation remained at 1 percent last month, missing forecasts for a reading of 1.1 percent. Services inflation, a proxy for domestic price growth, accelerated to 2.5 percent from 2.3 percent in August.
The retail-price measure of inflation slowed to 0.8 percent from 1.1 percent, the least since November 2009. According to the report, the biggest downward impact on the annual inflation rate was from clothing and footwear, as well as gasoline.
“Though inflation has turned very slightly negative this month, the bigger picture is of a broadly flat inflation rate since the beginning of the year,” said Richard Campbell, head of CPI at the statistics office.
On Tuesday, the pound fell from 1.53868 to 1.52061 against the US dollar after the data was made available.
