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UK deflation for first time in 55 years

Tuesday, May 19, 2015 - 02:00

Britain's annual rate of consumer price inflation has fallen below zero for the first time since the 1960s. As David Pollard reports, euro zone prices were flat, ending a four month run of falls.

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Queen Elizabeth at the Chelsea Flower Show. The last time the UK had inflation like this, the British monarch was still in her early thirties. Bank of England governor Mark Carney - he wasn't even born. (SOUNDBITE) (English) MARK CARNEY, GOVERNOR, BANK OF ENGLAND, SAYING ''To be clear, we expect inflation to be very low for the next several months. But over the course of the year as we get towards the end, inflation should start to pick up towards our 2 per cent target, and our job is to ensure that inflation remains low, stable and predictable, so the British people should enjoy this period of very low energy prices, very low food prices, enjoy it while it lasts.'' As perhaps will Carney. Consumer prices fell a bigger than expected 0.1 per cent in April. The first time inflation's actually fallen below zero since 1960. Richard Hunter is from Hargreaves Lansdown. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF EQUITIES AT HARGREAVES LANSDOWN STOCKBROKERS, SAYING: ''It further takes some of the pressure off to increase interest rates. Currently the consensus is well into 2016 before we'll see a rate hike. And although it can never be confirmed of course, there is also the likelihood that the UK will let the US hike rates first before it even considers doing something similar over here.'' For those who want more zing to their inflation, look to the euro zone. Consumer prices confirmed as up 0.2 per cent on the month - ending four months of falls. If not good, it's certainly less bad than the deflation many feared was setting in. Though with the latest ZEW German sentiment index falling way below forecasts - it dropped to 41.9 in April - questions are still being asked about the euro zone. (SOUNDBITE) (English) RICHARD HUNTER, HEAD OF EQUITIES AT HARGREAVES LANSDOWN STOCKBROKERS, SAYING: ''One thing it does highlight of course is just what a two or a three-speed economy the euro zone is running on, when you've got incredibly high youth employment in the likes of Spain and Italy. This is where a one-size fits all approach can have its limitations.'' Green shoots perhaps, but not everything in Europe's garden is in flower just yet.

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UK deflation for first time in 55 years

Tuesday, May 19, 2015 - 02:00