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Commenting on today’s Consumer Prices Index announcement, Jon Neale, Head of UK Research at JLL, said: “Inflation is reaching lows not seen since the early 1960s. Understandably this is stoking fears that the UK could be facing deflation, and indeed Mark Carney has indicated that he expects the CPI figure to fall below zero sometime in the spring.
“These fears are misplaced. The main driver of the fall in CPI has been the collapse in commodity prices, particularly crude oil, over the past few months, while a reduction in food prices has added to the downward pressure. Meanwhile, the UK’s labour market remains robust, with falling unemployment starting to feed through to better wage outcomes. Consequently, this will be a bumper year for the consumer, with rising incomes and falling outgoings. This will maintain momentum in the economy.
“From a property point of view, these factors will allow the MPC to keep base rates at 0.5% for the remainder of the year. There could possibly be a further cut if inflation remains stubbornly low, however this looks unlikely at this stage. As a result yields could fall even further across many markets. Borrowing costs are also likely to remain low, supporting the housing market, and hopefully triggering much-needed development across the property spectrum.”
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Head of UK Research
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