It now seems likely that there will be a prolonged period of ultra low interest rates after inflation has finally reached below the 2% mark. This will certainly come as a light relief for all, as a combination of a slowing economy and reducing food prices has meant that inflation is now under the Governments target for the first time since September 2007. According to the Office of National Statistics, the Consumer Prices Index fell to 1.8% in June, down from 2.2% in May. In addition, the Retail Prices Index which includes housing costs, fell to a historic low of -1.1% the lowest its been since records began in 1948.

Food and non-alcoholic drink prices attributed to the downward movement, with items such as meat, bread, milk and eggs leading the way. Interestingly, on the other hand there was a slight upward movement in the recreational and culture category with the price of computer games increasing.

Low inflation not only means that goods are growing more expensive slower, but also signals that interest rates will stay low. This is good news for both individuals on low incomes as their purchasing power has essentially gone up but also for borrowers.

However, if this persists Britain may find itself in a state of deflation. This is essentially the predicament Japan got themselves into, where the cost of goods gets cheaper as time goes on rather than more expensive. This puts consumers off spending and can have a severe impact on jobs, growth and investment.