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Puzzlingly good inflation fall is good news for borrowers

This is a golden age. It might not feel it - the country is still emerging, bruised and battered, from a six year downturn - but the numbers are puzzlingly good.

Today we¹ve learned that inflation has fallen to 1.9 per cent - that¹s below the Bank of England¹s target of two per cent and the lowest since 2009.

The news is a vindication (so far) of the Bank of England's bet to keep interest rates at 0.5% until the recovery is assured. Credit: Yui Mok/PA Wire

At the same time, the economy is growing apace - the Bank of England¹s most recent forecast is for 3.4 per cent growth this year. By recent European standards this is a boom. Normally we¹d expect inflation to rise in conditions like this.

The Bank last week explained that it thinks there is plenty of spare capacity in the economy which explains why wages and prices aren¹t rising:

What it means for borrowers is that interest rates will stay at the current emergency lows for longer - it¹s a vindication (so far) of the Bank¹s bet that it can keep interest rates at 0.5 per cent until the recovery is assured.

A puzzle - but a good one for borrowers.