It is "probable" that inflation will turn negative in the coming months, the Bank of England Monetary Policy Committee has said.
In the minutes of its latest meeting, published this morning, the committee said that the inflation rate – currently at 0% - would drop further.

The document makes two references to a prediction of negative inflation this year.

The minutes stated: "It was probable that the twelve-month inflation rate would briefly turn slightly negative at some point in the coming months.

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"CPI inflation had fallen to zero in February and had stayed there in March. This would necessitate a further letter from the Governor to the Chancellor of the Exchequer, which would be published alongside the May Inflation Report. Inflation was likely to turn slightly negative briefly at some point in the coming months and to remain low for the rest of the year, probably requiring further letters over that period.

"The path of inflation thereafter would depend on the way in which wages and prices responded to developments in the real economy."

IFP board member Chris Williams CFP^CM, chief executive of Wealth Horizon, said: "With Consumer Prices Index inflation already at zero, it is understandable the MPC's forecasts would be pointing towards a period of deflation.

"For investors this is mixed news. Falling pricing is not a sign of a healthy economy, and can turn into a serious problem if left unchecked, especially if it happens in a country that is highly-indebted.

"However, it does mean savings pots will stretch further as the cost of goods and services fall. It also means investments look even more attractive, as the returns they are generating will go further as prices fall."

Calum Bennie, savings expert at Scottish Friendly, said: "While the stagnation of the base rate is bad news for savers, the present low inflation due to low fuel costs is something consumers should enjoy while it lasts. However it makes sense to try and use these benign circumstances to put aside money for when this short-term period of deflation is over and interest rates go up – as they undoubtedly will.

"All eyes will be on the UK economy after the May General Election, particularly as any change in Government could have a bearing on interest rate decisions depending on their economic strategy."