UK Consumer Prices Index inflation rate climbs 0.1% in May

UK inflation rate, as measured by Consumer Prices Index (CPI), climbed back into positive territory last month, figures released on Tuesday showed.

According the Office for National Statistics, UK inflation rose to 0.1% in May compared with a -0.1% reading in the previous month.

Analysts expect CPI inflation to remain within a range of 0% to 0.5% over the next six months, driven by lower commodity prices.

“While CPI inflation is likely to break out of this range at the end of the year, we think that inflation will remain comfortably below the Monetary Policy Committee’s 2% target throughout 2016,” said Samuel Tombs, senior UK economist at Capital Economics.

While periods of deflation – when the price level actually drops, as opposed to simply advancing more slowly - were not an atypical event before the twentieth century, as a result of positive technological changes, since then they have tended to coincide with periods of significant economic and financial stress.

That was the case in the UK during a large portion of the period between the two World Wars.

However, US shale revolution and the resulting drop in international energy prices - which led to the recent drop in CPI - is a good example of how technologies can have a positive impact on the economy and prices.