BANK of England experts predicted yesterday that prices could enter an unprecedented negative spiral later this year.

The latest monthly inflation report said the CPI measure could plunge below zero within weeks — raising the prospect of drastic action to stop a total economic stall.

Sustained falling prices would push up the cost of debts and risk a major slump, lower pay and higher unemployment.

Trades Union Congress general secretary Frances O’Grady said the forecast should be a “wake-up call” to the government.

“Deflation would be no surprise in Britain’s slow growth, low-pay economy and would pose real risks to future growth and living standards,” she said.

“Responsibility for stabilising inflation cannot be left to the Bank of England alone — the government must come up with a credible plan to get wages rising faster.

“And the Chancellor should stop threatening the economy with the biggest austerity package in the developed world.”

The Bank of England said its best guess was a return to inflation within a year.

But in a sign of the uncertainty surrounding economic crisis at home and abroad governor Mark Carney said it was preparing emergency measures if inflation enters a “self-reinforcing” downward spiral.

That could include more quantitative easing on top of the £375 billion already released into the economy.

And it could mean the official interest rate falls nearer to zero from its record low 0.5 per cent.

Sweden cut its main bank rate to -0.1 per cent yesterday to combat deflation of -0.3 per cent.

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