The news will temper any talk of a rise in UK interest rates in the very near term, and harden the consensus that it will be some way into 2016 at the earliest before Mark Carney and his colleagues move.
The latest release form the ONS is just the latest chapter in a tale of mixed messages and contradictory data being generated by the British economy.
“Inflation is back to square zero as the supermarket price war and summer clothes sales continue to weigh on prices,” said Ben Brettell, senior economist at Hargreaves Lansdown. “There is clear daylight between wage growth and inflation, putting more money in the pocket of consumers, who have faced tight household budgets since the financial crisis took hold. Continued low inflation probably means more pain for savers though, because the Bank of England is under no pressure to raise interest rates in the immediate future.”
“Zero inflation combined with wage growth running at 2.7% should boost consumer spending, and this should in turn be good news for economic growth, which I expect to pick up during the second half of the year,” Brettell added.
