According to the graph here (copied below), there was a considerable deflation in UK around 2015. I thought it may have something to do with the Brexit discussions (or even Grexit, the Greek equivalent), or maybe the US dollar rise around the same time (see here). Can someone please explain what are the exact/most probable causes?
Deflation was in UK in April 2015 and September 2015. Both of the times it was just 0.1% which is not really considerable.
Following the Bank of England (UK central bank that also does research on inflation) as well as analysis of economists from various private banks (see this Guardian interview), the main reason for this was positive supply shock, namely:
The current low level of inflation can largely be accounted for by lower energy, food and other imported goods prices, although it also reflects muted domestic cost growth.
This has little to do with brexit, in fact it was rather in spite of brexit. Energy prices are effectively set at world markets, UK is not big energy producer, in fact as the report mentions that energy was imported (brexit if anything makes imports from EU more expensive). Food prices are very sensitive to energy as well and this further contributed to that. Also value of foreign currencies does not really affect domestic inflation unless there is a peg in place, like for example when Danish Krona is pegged to Euro.
