From The Times
December 18, 2008

The party's over if deflation grips the economy

We explain why falling prices could wreak havoc with your finances

Andrew Ellson and Anne Ashworth

Inflation is tumbling and fears are growing that deflation, where prices actually start falling, may become a feature of the economy next year.

This week the Office for National Statistics reported that the consumer prices index (CPI), a key measure of inflation, fell to 4.1 per cent last month, down from a high of 5.2 per cent in September. Jonathan Loynes, chief European economist at Capital Economics, the consultancy, says: “November's CPI figures are another step along the path that is likely to lead to the first bout of deflation in the UK for almost half a century.â€