Official figures this week showed that consumer price inflation fell to 1.6 per cent last month, its lowest rate since October 2009. If university tuition fees and utility prices are excluded - to get a better picture of inflation in the market sector of the economy - inflation is just 1.1 per cent.
In part, this is due to a supermarket price war; the ONS estimates that food price inflation has fallen from 3.7 to 1.7 per cent in the past 12 months. However, the British Retail Consortium said last week that non-food retailers are cutting prices at a record rate, in part because of weak demand. It reported this week that sales fell 1.7 per cent in the year to March, albeit in part because of the late Easter.
Another force for low inflation comes from overseas. China's slowdown is reducing commodity prices, and the combination of a relatively strong pound and low inflation in the euro area - prices there rose just 0.5 per cent in the year to March - means the UK is importing low inflation. The ONS says manufacturers' raw materials' costs fell by 6.5 per cent in the year to March, the biggest drop since September 2009.
Some economists believe these disinflationary factors will keep inflation below its 2 per cent target for a long time. Peter Spencer at Ernst and Young's Item Club says the rate "is set to stay below 2 per cent through to 2016". He adds that a growing labour force and continued public sector cuts - government employment is projected to fall by another 290,000 in the next two years - will also hold down wage growth.
Not everyone is so optimistic, though. Danny Gabay at Fathom Consulting says today's figures "mark the low point" for inflation. He fears that higher wage inflation caused by lower unemployment, allied to slow productivity growth, will push inflation to over 3 per cent by the end of this year.
One area where inflation is certainly not low, though, is the housing market. The ONS reported this week that UK house prices rose by 9.1 per cent in the year to February, with London prices surging by 17.7 per cent. However, many economists believe the Bank of England will respond to this by demanding that banks curb their mortgage lending rather than by raising interest rates.
