Another BoE official just poured cold water on deflation fears

Jessica Morris
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Broadbent says Britain is experiencing "good" deflation (Source: Getty)

Bank of England deputy governor Ben Broadbent has joined a chorus of rate-setters who've said the risk of Britain slipping into a deflationary spiral remains low.

"The likelihood of a broad and protracted deflation, afflicting wages as well as prices, is pretty low," he said.

So far, low inflation has been a boon for the economy, providing businesses and consumers with low prices, while safeguarding them from nastier side-effects such as wage cuts and layoffs.

Broadbent said:

In fact, it's been a largely positive story, because the fall in inflation has been driven not by the declining value of what we sell, including wages ... but a steep fall in the price of something we buy.

It is what some have termed "good" deflation and, while it is unlikely to go on for that long, it is positive, no negative, for demand and output.

Earlier this week the ONS said Britain recorded zero inflation in February for the first time since the 1960s. Its widely expected to turn negative in the coming months amid lower energy amid falling food and oil prices.

Recently a number of Bank of England officials have publicly dampened any concerns about deflation. This comes as they prepare to enter a period of silence ahead of the general election in May next week.

Deputy governor Minouche Shafik and two of the externally appointed members of the MPC, Kristin Forbes and David Miles, have said low inflation will be temporary, because it's being driven by low food and oil prices.

However, the Bank of England's chief economist Andrew Haldane has said that the risk to inflation is two-sided, and he personally believes these risks are actually skewed to the down-side.

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