Coronavirus: Inflation plunges to August 2016 low as lockdown drives price shift

May 20, 2020

The rate of inflation has plunged to its lowest level since August 2016 as the coronavirus crisis lockdown drove violent shifts in prices for consumers.

The Office for National Statistics (ONS) said the Consumer Prices Index (CPI) fell to 0.8% in April - down from 1.5% in March when efforts to slow the spread of COVID-19 began in earnest.

The decline was mainly driven by falling energy and fuel costs, the report said, with the cost of unleaded recording its largest monthly slump on record as global oil prices crashed.

A fall of 10.4p a litre was recorded.

The decision to reduce the price cap on default household energy tariffs also contributed, the ONS said.

But it charted price increases in its games and hobbies category and for fresh food - especially vegetables - as the public was forced to remain at home.

The decline in the annual rate was more intense than economists had predicted and there are growing expectations it will near zero in the coming months.

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The Bank of England's central target is to achieve a rate of 2% but its base rate of interest is hovering just above zero so there is little scope to cut it to boost activity and therefore prices.

Jonathan Athow, deputy national statistician for economic statistics at the ONS, said of the inflation figure: "While the coronavirus limited the availability of some goods and services, its effect on prices was more muted.

"Falling petrol and diesel prices, combined with changes to the domestic energy price cap were the main reasons for lower inflation in April.

"Games, toys and hobbies saw rising prices, perhaps as people occupied their time at home.

"Food prices grew no more quickly than other goods and services, though fresh vegetables did see stronger rises."

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