UK inflation rate falls to 0.5% in December

14:54 • 13.01.15
Economy

The UK inflation rate fell sharply to 0.5% in December, the joint lowest on record, official figures show, the BBC reports.

Inflation as measured by the Consumer Prices Index fell from 1% in November to its lowest rate since May 2000, helped by cheaper fuel prices.

A fall below 1% triggers a letter of explanation from Bank of England governor Mark Carney to the chancellor.
This is because the CPI rate is more than one percentage point away from the Bank's 2% target.

The Office for National Statistics (ONS) also said that the Retail Prices Index (RPI) measure of inflation fell to 1.6% from 2%.

The ONS said that in addition to falling fuel prices, the drop in inflation was also due to the rises in gas and electricity prices in December 2013 falling out of the equation.

Paul Hollingsworth of Capital Economics said inflation looked likely to fall further to about 0.2% in February, and that an outright drop in prices was possible.

That would bring the UK closer to the scenario playing out in the eurozone, where deflation has become a problem for policymakers.

Chancellor George Osborne hailed the fall in the inflation rate as good news. He tweeted: "Inflation is 0.5% - lowest level in modern times. Welcome news with family budgets going further & economic recovery starting to be widely felt."

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