This is the third time this year that inflation, as measured by the Consumer Prices Index (CPI), has been negative. Prior to this year the UK had not experienced negative inflation since 1960.
Upward price pressures for clothing and footwear were offset by downward price pressures for university tuition fees, food, alcohol and tobacco, resulting in no change to the overall rate of inflation last month, the Office for National Statistics (ONS) said.
Overall, the UK’s weak inflation rate is largely down to external factors including persistently weak global demand and a strong pound pushing down commodity prices.
A Bank of England report this month said inflation was likely to remain below 1% until the second half of next year, well below its 2% target.
Maike Currie, associate investment director at Fidelity International, said: “The Bank of England’s suggestion that interest rates may stay at rock bottom throughout next year may just be the start of it.
“Interest rates could stay low for the foreseeable future if low inflation turns out to be less cyclical than structural. In a low interest-rate environment, investors continue to view equity income as a safe haven and a rare source of yield.”
