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UK falls deeper into deflation

May 19 2009

The UK fell deeper into deflation in April as the Retail Price Index (RPI) dropped to its lowest level in more than 60 years.

Figures released by the Office for National Statistics (ONS) showed the RPI dropped to -1.2 per cent, from -0.4 per cent last month, representing the biggest reduction since records began.

The Consumer Price Index (CPI) also fell from 2.9 per cent in March to 2.3 per cent last month, with the ONS attributing the drop to lower energy bills and cheaper food prices.

David Kern, chief economist at the British Chambers of Commerce, says inflation will fall further in the near future.

'Talk of recovery is premature at this stage, so the Bank of England must execute its quantitative programme more forcefully,' he adds.

The expert also states that rising unemployment levels must be made the main focus of any policy talks.

Howard Archer, economist for IHS Global Insight, adds that the CPI will drop 'substantially' in the coming months, but a negative figure on this scale may be avoided.

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