Osborne: Don’t fear low inflation

The chancellor will make a speech today in which he’ll tell voters not to be afraid of low inflation.

The rate of inflation fell sharply during December to 0.5%, Office for National Statistics figures showed yesterday. This is a drop of 0.5%, from 1% in November.

But George Osborne is confident we have nothing to fear from the slow rate of growth, adding it does not mean the UK is heading the same way as the eurozone, which is battling deflation.

“We should not confuse this welcome news with the threat of damaging deflation that we see in the eurozone,” he will say in a speech to the Royal Economic Society today.

Osborne will blame the fall on “external factors” such as low oil prices.

Even if we do suffer deflation, “a few months of very low or even negative inflation” will not pose much risk to the economy.

He will say: “[In the eurozone] the debate has understandably turned to the dangers of deflation - the risk of a self-reinforcing spiral where economic activity falters, consumers defer purchases as prices fall and nominal debt burdens become ever harder to manage.

“Rising real incomes, a recovery spreading to all parts of our economy, and family budgets that can stretch that little bit further - let’s celebrate these effects of low inflation, not fear them.”

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Readers' comments (1)

  • Anonymous

    Osborne is a cretin with no understanding of economics. He is the most bumbling useless idiot that has ever been appointed Chancellor.

    Vote him out this May.

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