Dr Dennis Novy is an Associate Professor of Economics at The University of Warwick.
He said: “Inflation in the UK is on a downward trend and widely expected to fall below 1 per cent for the first time since 2002 when the official figures are published on Tuesday (13 January).
“This would trigger a letter of explanation from Mark Carney to George Osborne - the first of this kind - because inflation is too low.
“There are several reasons for low inflation. The price war among supermarkets, the falling oil price and weak demand all have played their part.
“The Bank of England is under pressure. With inflation falling, interest rates should normally be reduced. But they have been at rock bottom for nearly six years now and cannot be cut further.
“There is a risk for the UK economy. Inflation is inching close to the danger zone of outright deflation. Once prices stop rising, consumers and businesses delay spending and can pull down the economy. If that happens, it would be time for the Bank of England to have another look at unconventional measures such as quantitative easing.
“Many voices, especially from the City, have long called on the Bank of England to finally raise interest rates. But the latest inflation numbers and weak wage growth make higher interest rates unlikely any time soon.”
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He is free between 12:00pm and 12:50pm; 2:10pm and 2:50pm; and after 6pm.
Contact Lee Page, Communications Manager, Press and Policy Office, The University of Warwick. Tel: +44 (0)2476 574 255, Mob: +44 (0)7920 531 221. Email: firstname.lastname@example.org.
Lee Page, Communications Manager
Tel: +44 (0)2476 574 255
Mob: +44 (0)7920 531 221