Inflation hits 0 per cent record low

The official data for February reveals the lowest rate since records began.

Economists had broadly predicted the rate would drop to 0.1 per cent and the Bank of England targets inflation of 2 per cent, which it neared last June at 1.9 per cent.

Price movements in recreational goods and food, furniture and furnishings helped to cut the rate from 0.3 per cent in January.

February’s figure is the lowest rate of Consumer Prices Index (CPI) inflation since estimates of the measure began in 1988.

The rate of Retail Prices Index (RPI) inflationn fell to 1 per cent from 1.1 per cent.

The drop in the CPI measure was sharper than many analysts had expected, with most expecting a rate of 0.1 per cent

Liz Cameron, chief executive of Scottish Chambers of Commerce(pictured), said: “The fact that inflation now sits at 0.0% reveals just how out of step business rates increases have become. Instead of annual rates increases being in step with inflation, next week will see bills rise by 2%, far in excess of the current rate of inflation.

“Indeed, since the last revaluation in 2010, business rates revenues in Scotland are projected to have increased by £731 million by 2015-2016, which represents some £470 million over and above the rate of inflation.

“With the Scottish Parliament’s basket of taxes growing and a full review of business rates being implemented in England, it is time for constructive change here in Scotland.”

Rain Newton-Smith, director of economics at business lobby group the CBI, said: “Despite inflation dropping to zero, it is unlikely we will see falling prices for a prolonged period, particularly as the pressure from lower oil prices fades.”

However, she added: “With the Monetary Policy Committee still alert to the risk of very low inflation becoming entrenched, a rise in interest rates anytime soon seems off the cards.”

Howard Archer, chief UK and European economist at IHS Global Insight added: “Given the weakness of food and oil prices, and with utility price cuts to still to fully kick in, a brief period of deflation now looks imminent over the coming months. However, the fact that oil prices have climbed off their January lows dilutes the chances that there will be extended, marked deflation in the UK.

“While UK inflation expectations have weakened in recent months, there is crucially no evidence that deflation - let alone prolonged, meaningful deflation - is considered a possibility by consumers.”