Inflation Drops Below Zero

RPI includes mortgage costs, which, if you are lucky, you will have noticed a significant drop in monthly payments when the Bank of England dropped the interest rates.

The Consumer Prices Index (CPI) also fell in March to 2.9%, but is still well above the governments target of 2%.

The Office for National Statistics said that lowered oil prices was one of the major drivers in downward inflationas it had prompted lowering of energy prices. Further reductions in April's energy prices could further lower inflation figures next month.

Other factors included lowered vegetable and fuel prices. The price of clothes has risen in comparison to a year ago, along with games and toys.

Negative inflation isn't all good news though as RPI is often the starting point for wage negotiations. TUC general secretary Brendan Barber has warned that the negative RPI figure should not be taken as an excuse to freeze wages.

\"Although in some workplaces unions have agreed to put pay increases on hold or take cuts in wages to save jobs, many companies are still profitable and able to afford decent pay rises,\" he said.

\"Widespread wage freezes would prompt families to cut back on their spending, which would be the last thing the UK's struggling economy needs right now.\"

The RPI is also the figure that determines what happens to benefits and the basic state pension. The figure used for pensions will be the one that comes out in September, although there is a minimum increase of 2.5%.

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