Inflation remained at zero in March according to Daily Telegraph sources, as a fall in gas and clothing prices was offset by higher fuel costs.
Inflation, as measured by the consumer prices index (CPI), stood at zero last month compared with a year ago. This is still the lowest rate since records began in 1989, and also represents the joint-weakest price growth since 1960, according to Office for National Statistics estimates.
Economists, who expected inflation to remain unchanged, said there remained a “50-50 chance of deflation” in the next few months. March’s reading stood at -0.01pc when calculated to two decimal places.
The ONS said the largest downward effect came from clothing and footwear, where prices fell between February and March this year for the first time since the CPI was introduced.
This was offset by higher petrol prices, which rose by 3.8p per litre in March compared with no change between the same months a year ago. Diesel prices also rose this year by 3.5p, compared with a fall of around half a pence a year ago.
The dramatic fall in the oil price, which has almost halved since last June, continued to bear down on the headline rate. The ONS said food and petrol reduced the annual CPI rate by 0.8 percentage points in March.
Core inflation, which strips out volatile elements such as energy and food, stood at a nine-year low of 1pc in March, down from 1.2pc in February.
Most economists believe low inflation is good news for the UK because it puts more money in people’s pockets in real terms, boosting consumption. However, analysts at Barclays said that continued weakness in core inflation would force the Bank of England to keep interest rates at a record low of 0.5pc for even longer.
“Weakness in core prices will undoubtedly keep the Bank of England on its toes and likely challenge any attempt at an early rate hike,” they said. “While weak inflation should not be a surprise given subdued pressures from exchange rate, oil prices and wages, the Bank nonetheless made clear that its primary concern in the short term was to avoid such low inflation becoming entrenched and even highlighted that it stands ready to take additional measures if needed.”