Oxford Economics’ latest assessment of inflation in the UK has concluded that: ‘Though the very low rates of inflation seen over the past eighteen months are unlikely to persist, our ‘bottom up’ forecast suggests that inflation is likely to remain short of the 2% target over the next two years. This means that a 2016 rate hike is very unlikely, although a move in mid-2017 still looks plausible.’

The firm says that the lack of inflation in 2015 was not only due to a perfect storm of falling petrol, food and energy prices, but core inflation was also very sluggish.

‘We expect food, petrol and energy to contribute positively to inflation in 2017. However, with our global forecasts for oil and food prices relatively benign, the scale of the inflationary pressures from these categories is set to remain fairly muted. We expect to see only a modest pickup in core inflationary pressures. There appears to be a sizeable amount of spare capacity in the economy, which will continue to weigh on wage growth and profit margins. And while the recent depreciation of sterling may raise import prices later this year, our forecast assumes that the depreciation will be relatively short-lived with a rally in H2 2016 after the referendum.’