After swinging into positive territory in March and April, inflation has again turned negative, with consumer prices falling by 1% in July (the steepest decline since end-2015). This has resulted in average deflation so far this year of 0.2%. Price pressures will remain weak during 2016 as lower fuel, transport and communications costs continue to offset food price increases. Base-year effects will also be stronger in the second half of the year, making a return to positive territory likely in the fourth quarter. Overall, however, the extremely weak nature of the economic recovery will prevent a marked upturn in consumer demand in 2016-17 and, combined with still modest international oil prices, this will result in average inflation of just 1% in 2016-17. Risks to this forecast stem from a possible sharp rebound in oil prices (which would quickly feed through to upward price pressures), but this does not form part of our baseline scenario.