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Osborne: Let's celebrate effects of low inflation not fear them

Britain could experience negative inflation over the coming months without any significant risk to the economy, the Chancellor is expected to say.

In a speech to the Royal Economic Society, George Osborne will say the slump in the headline rate to just 0.5% is due to external factors - and that the benefits for consumers should be celebrated.

Bank of England Governor Mark Carney told ITV News that deflation in the UK is "possible," but is a risk that can be managed,

He was speaking after inflation fell to just 0.5%,which was welcomed by David Cameron as "fundamentally good news" for household budgets.

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Cameron: We don't face European countries' deflation problem

David Cameron has insisted the UK does not face the prospect of "potential deflation" seen on the continent.

Earlier Bank of England governor Mark Carney told ITV News there was a "possible" risk of deflation in the UK, but said it could be managed.

The Prime Minister told Heart radio that Britain's low inflation rate of 0.5% was due to a lower oil price "which is going to see lower petrol prices and diesel prices at the pumps".

We don't face the problem that some European countries face of potential deflation because I think our low inflation has been brought about by this lower oil price

It is fundamentally good news, this low inflation rate. I can remember governments plagued by high inflation and high unemployment; we are in a good situation where our economy is growing, more people are getting jobs, petrol prices are coming down, that should help Britain's hard-working families to see a better standard of living.

– David Cameron

Read: Key questions about the fall in inflation

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Osborne: Let's celebrate effects of low inflation not fear them

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