The latest inflation figures show that the rate, as measured by the Consumer Prices Index, rose to 0.1% in May illustrating that the UK economy has edged back into inflation one month after falling into deflation for the first time since records began.
Rain Newton-Smith, CBI Director of Economics, said:
“As expected, inflation has now edged above zero and is likely to remain low in the coming months, boosting households’ spending power.
“Inflation is set to rise gradually from the Autumn, as the effects of past falls in oil and food prices fade.”
Jeremy Cook, chief economist at the international payments company, World First, said:
“Deflation in the UK was expected to be brief — it has lasted only a month.
“To be honest, there is little difference between 0.1% and -0.1% for the man in the street. Deflation or very low levels of inflation are both stimulatory for the UK economy as consumers continue to see real wage increases and spend accordingly.
“Where it does matter a little more is on Threadneedle St., and the Bank of England will be quietly thankful that we are back into positivity. Expectations are now that we have put in a ‘bottom’ in inflation and that the speed of price increases will gradually repair closer to target as the year goes on, and last year’s falls in energy prices fall out of the basket.
“I believe that once CPI hits 1.0% and is expected to remain stably above that mark, we will see the Monetary Policy Committee take the plunge and hike rates — that could be as soon as Q1 next year.”