Inflation falls back to zero

The latest figures from the Office for National Statistics showed the fall in inflation was in line with market analysts' forecasts and was mainly due to the biggest fall in oil prices since the start of 2015.

Moreover, monthly UK inflation rose by 0.2% in August 2015 from a month earlier, which was in line with market analysts' forecasts.

Vicky Redwood, chief UK economist at Capital Economics, said: “UK inflation is still bouncing around zero and is likely to stay there for most of the rest of this year.”

She warned that inflation could yet drop back into negative territory before the end of the year.

She explained: “The British Gas price cut will show up in the next set of figures and the fall in agricultural commodity prices could push down food price inflation.

“CPI inflation should nonetheless rebound at the turn of the year, on the anniversary of the (much bigger) falls in energy prices at the start of 2015.

“But with productivity finally picking up and keeping unit wage costs subdued, inflation will still take a long time to return to its target.”

Accordingly, said Redwood, the Bank of England can take its time with the first interest rate rise.