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Low inflation sweet spot is “as good as it gets” - IoD

17 Feb 2016

The Institute of Directors has said low inflation and cheap oil are “as good as it gets” for the UK economy, in response to official figures released this morning which showed inflation, measured on the consumer price index (CPI) running at 0.3 per cent in January 2016.

James Sproule, Chief Economist at the IoD, said:

“Whatever turmoil may be stalking the global economy, we should be under no illusions: cheap oil and low inflation are good news for Britain. As the cost of moving goods and people around the world drops, UK households have a bit more to spend or save, and firms can boost their bottom lines, cut prices for their customers or increase their investments. Britain is in the sweet spot where prices are barely going up, and consumers are happy to keep on spending.

“Despite the slight increase in the headline rate, we are still considerably off a level of inflation which could be considered ‘normal’. We should be in no doubt, this is as good as it gets as far as inflation is concerned. Further volatility on the financial markets could undermine consumer confidence and might encourage people to save, rather than spend, the low-inflation windfall.”

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