Latest UK inflation data – February 2015

The headlines are full of inflation being the lowest rate on record. Even George Osborne was tweeting about it:

Though true, this is more than a little misleading. Firstly it is referring to CPI which we only started publishing in 1996 (and working out annual changes in 1997). Secondly, it is using CPI which as I have highlighted elsewhere markedly underestimates true UK inflation by at least 1%. If you look at the records of RPI, which more accurately estimates UK inflation, and has records that go back just after World War II, you definitely cannot make this statement.

RPI did fall today quite markedly to 1.1% (from 1.6% last month). However but it has been at that level or lower 43 times since 1947 i.e.

  • April 1949
  • December 1953
  • February-June 1954
  • April-December 1959
  • January-May & August 1960
  • June-July 1963
  • August-September 1999
  • November-December 2001
  • February & May-June 2002
  • December 2008
  • January-November 2009

See Table 37 in ONS report.

Furthermore, if you take a longer term perspective, there have regularly been periods when inflation has been low and below zero. If you examine UK inflation records back to 1264, you will see that the UK goes through cycles of prices rising for a period of a hundred or so years and then remaining stationary or declining for another century. See Inflationary Wave Theory and graph below. Therefore in this context, George Osborne’s comment is very misleading to imply that inflation is at its lowest rate ever.

750 years of UK prices