After swinging into positive territory in March and April, annual inflation has again turned negative, with consumer prices falling by 1% in July (the steepest decline since end-2015), despite a rise of 0.6% in month-on-month terms. Price pressures will remain weak in the short term as lower fuel, transport and communications costs continue to offset food price increases, and we estimate that annual inflation will average just 0.1% in 2016 as a whole. Going forward, the extremely weak nature of the economic recovery will prevent a marked upturn in consumer demand in 2017-18 and, combined with still-modest international oil prices, this will result in average inflation of 1.8% and 2.1% respectively. Risks to this forecast stem from a possible sharp rebound in oil prices (which would quickly feed through to upward price pressures), but this is not our baseline scenario.