The Consumer Price Index figures released today by the Office of National Statistics (ONS), show  a negative inflation figure of  - 0.1% , a slip into  deflation, almost certainly temporary, not seen for 55 years in the UK.

David Lamb, head of dealing at the forex specialists FEXCO, comments:

"The D-word has finally become a reality. While last week's downbeat Inflation Report from the Bank of England had prepared the markets for the worst, the confirmation that the UK has slipped into deflation has arrived like a bucket of cold water onto Sterling.

"The pound fell sharply against the Dollar on the news. With the prospect of interest rate rises slowly disappearing over the horizon, investor appetite for Sterling is evaporating fast.

"With international investors increasingly rattled by the prospect of Britain's EU referendum, Sterling's post-election highs are likely to be short-lived."

Professor Mark Taylor Dean of Warwick Business School and former Bank of England International Monetary fund economist said:

 "This kind of deflation is not bad for the economy because it's coming from the supply side - weak energy and food prices - rather than any fundamental weakness in the demand side or consumer spending. It's also expected to be temporary as the oil price has rebounded and commodity prices have stabilised. Deflation is only bad for the economy when prices are expected to continue to fall and people postpone consumption, which weakens demand and leads to further falling prices, in a vicious downward spiral.

"But with average earnings rising in the UK and consumer spending still buoyant, a temporary dip in prices is not a problem - in fact, consumers are very slightly richer as a result.

"The key issue for the UK economy is whether productivity - total output for every hour worked - will pick up now the election is behind us. We're still producing less per worker than in 2008, and that won't change until firms feel confident enough to spend money on capital investment rather than just taking on extra workers. When we see a strong recovery in business investment and rising productivity, the UK economy will finally be recovering soundly."