Inflation has fallen to zero for the first time in 49 years.

The figures released by the Office of National Statistics this morning reveal the weakest reading of the Retail Prices Index since 1960.

The announcement further fuels the fear that deflation could become a problem for retailers and the economy. Price increase has been in steady decline over the last eight months.

In January the rise was only 0.1 per cent compared with the same month in 2008.

Part of the cause of the drop has been the fall in house prices, which the RPI takes into account. On top of this, the interest rate cuts over the last six months have had a downward effect on mortgage repayments.

The Consumer Prices Index, which is not affected by the housing market, rose by 3.2 per cent, up slightly from January’s increase of 3 per cent.

The ONS says that the zero increase in inflation is also a result of falling costs in fuel and electricity.

Topics