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U.K. Inflation Rate Drops Below 1% Amid Negative Rate Debate

  • Leader
    July 7, 2020
    U.K.
    inflation slowed to the weakest level since 2016 in April as energy
    prices fell and the coronavirus lockdown put the brakes on economic
    activity.To get more news about
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      While
    the lockdown means it‘s hard to interpret the data, the report gives
    more of a flavor of the impact the coronavirus is having on the economy.
    Jobless claims surged last month, while Chancellor of the Exchequer
    Rishi Sunak said Tuesday that the nation was headed for a “severe
    recession, the likes of which we haven’t seen.”

      Consumer
    prices increased 0.8% from a year earlier, the Office for National
    Statistics said Wednesday, less than the 0.9% economists expected. The
    core rate, which excludes volatile energy and food prices, slipped to
    1.4%.

      The
    pound was little changed after the report. Investors are betting that
    the BOE will eventually cut interest rates below zero after a string of
    policy makers, while indicating its not imminent, declined to rule out
    such a move.
    Εικόνα
      The
    drop in April was the steepest since 2008 and takes the headline
    inflation rate to less than half of the BOEs target, meaning Bailey will
    have to write to the Chancellor explaining the reasons for the decline.

      The
    central bank, which has already slashed interest rates to 0.1% and
    restarted bond buying to fight the crisis, said this month the economy
    may be heading for the worst downturn in three centuries as the pandemic
    keeps stores closed and consumers away from shops.

      Downward pressure on prices came from fuel, energy and transportation costs, as well as clothing.
      The
    ONS also reported widespread discounting of luggage and personal items
    such as jewelry, including earrings, gold rings, diamond rings and mens
    watches.