The UK’s inflation rate fell to zero per cent in February – the lowest since records began, according to official figures
The Consumer Prices Index (CPI), which measures changes in the prices of the goods and services bought by households, has recorded the lowest rate of inflation since comparable records began in 1989.
The IoD has welcome the news, with chief economist James Sproule saying that it is “particularly encouraging” that the drop was driven by falling fuel costs.
“This is putting extra spending power directly into people’s pockets and is acting as a further catalyst to economic growth,” says Sproule.
“Looking to the longer term, we are encouraged that IoD members are planning pay rises for their staff in 2015. In the majority of cases these will be tied to improved corporate performance. This is the sort of responsible decision, which will ensure economic growth is sustainable.”
“However, low inflation does mean that governments must be that much more careful with decisions on tax and spending, as very low, or zero, inflation means miscalculations cannot be eroded in future years by inflation,” he adds.
“An incoming government must be very aware that they will have to live with any changes to tax rates or thresholds for the long term.”