Inflation in the UK has dropped to zero for the first time in recorded history. It's likely to go into reverse next. But what does the prospect of deflation really mean for your disposable income, debts and savings?
For the first time since modern records began, prices are no longer rising in Britain. In February and March 2015, inflation as measured by the Consumer Prices Index (CPI) dropped to 0.0%, meaning that the cost of the ‘basket of goods’ that it measures (everything from baked beans to car insurance) was the same as a year earlier. With energy bills likely to drop further as a result of cheaper gas, the cost of living in the UK could soon be decreasing. If so, the country will officially enter a period of deflation.
This is largely uncharted territory for the UK. The last time inflation shifted into reverse here is thought to be in 1960, when JFK was running for office and The Beatles were only just forming. Now though, it seems highly likely that inflation will drop below zero over the coming weeks, and many predict it will hover around zero for most of the year ahead.