Birmingham business leaders want government action after the UK experienced its first period of deflation in almost 50 years.
Office for National Statistics (ONS) data showed the Retail Prices Index (RPI) measure of inflation fell to minus 0.4 per cent in March, down from zero per cent in February, which is the first negative reading since March 1960.
The official Consumer Prices Index (CPI) measure also fell, from 3.2 per cent in February to 2.9 per cent.
The negative RPI could have unwanted consequences for many households because it is used as a benchmark for private sector wage settlements.
William Rogers, Birmingham Chamber of Commerce policy adviser, said the Chancellor needed to address the problem.
He said: “Alistair Darling should address these issues by supporting businesses and not use them to bail out public finances. The Chancellor must administer targeted fiscal stimulus for the year ahead while also presenting a plausible medium-term plan for restoring the public finances back to health.
“Inflation surged last year as oil prices spiralled, and the current fall in inflation is partly due to these high prices unwinding out of the calculations used to measure inflation. Its fall has also been attributed to the effects of deep interest rate cuts, which filtered through to lower mortgage payments, and plummeting house prices.”
RPI was pushed lower than the official measure because, unlike CPI, it includes housing costs and mortgage payments.
Last month’s fall reflects February’s cut in the cost of borrowing to one per cent.
The Bank of England has since slashed interest rates further, to a record low of 0.5 per cent.
The ONS said the largest downward pressure on CPI was a drop in household gas bills, as well as lower fruit, vegetables and bread prices compared with a year ago. Transport costs also played a part in pulling inflation down, mainly because of lower air fares on European routes compared with last March.