The UK has fallen into deflation for the first time since records began, driven by cheaper travel costs and the grocery price war.

  • Supermarket price war, falling fuel costs and cheaper travel fares drive deflation
  • Disposable incomes forecast to rise at quickest rate since 2007
  • Low inflation expected to keep interest rates down

The Consumer Price Index (CPI), which measures inflation rates, fell 0.1% in the year to April 2015, according to the Office for National Statistics.

In the previous two months rates hovered on the brink of deflation at 0%, after being forced down by the supermarket price wars and falling fuel costs.

However, the largest downward contribution for April came from transport services such as air and sea fares. The early Easter at the end of March also brought prices down during the rest of April.

The UK has never been in a period of deflation since the CPI began and financial modelling shows there has not been a period of deflation since March 1960.

As a result of deflation, disposable incomes are expected to rise at the quickest rate since 2007.

Low levels of inflation are also expected to help keep interest rates down. Rates have been frozen at 0.5% since March 2009, while it is expected they will only rise to 0.75% this time next year.

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