By Jonathan Davies
The UK should not fear low inflation, the Chancellor George Osborne will say in a speech later today (Wednesday).
A day after the Office for National Statistics (ONS) reported that inflation dropped to its joint record low of 0.5% of December, the Chancellor is expected to say: "We should not confuse this welcome news with the threat of damaging deflation that we see in the eurozone."
He will even suggest that the UK could even fall into "negative inflation", or 'deflation' to you and I. But whereas deflation has caused increasing problems for policymakers in the eurozone, Mr Osborne doesn't believe "a few months of very low or even negative inflation" would cause any significant issues for the UK economy.
In a speech to the Royal Economic Society, the Chancellor is expected to say: "There [in the eurozone] the debate has understandably turned to the dangers of deflation - the risk of a self-reinforcing spiral where economic activity falters, consumers defer purchases as prices fall and nominal debt burdens become ever harder to manage.
"Rising real incomes, a recovery spreading to all parts of our economy, and family budgets that can stretch that little bit further - let's celebrate these effects of low inflation, not fear them."
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