ANNUAL UK inflation dropped last month to its lowest for nearly two years, as fuel prices fell, according to official figures which reinforced expectations that benchmark interest rates would stay on hold for now.
The Office for National Statistics said yesterday that annual consumer prices index inflation had fallen from 2.3 per cent in November to 2.1% last month – the lowest rate since January 2017 and only marginally above the 2% target set for the Bank of England by the Treasury.
The Bank has raised UK base rates from 0.25% to 0.75%, with quarter-point increases in November 2017 and last August.
Read More: Ian McConnell: Paris metro poster for slapstick British farce evokes Brexit metaphor
Falling oil prices led to petrol prices reducing by 6.4p per litre between November and December, the ONS noted, compared with a rise of 0.8p per litre between the same two months of 2017.
Howard Archer, chief economic adviser to the EY ITEM Club think-tank, observed that average annual CPI inflation of 2.27% in the fourth quarter of last year was below the Bank’s expectation of 2.47% in its latest quarterly inflation report in November.
He added: “This facilitates the Bank maintaining a ‘wait-and-see’ approach on interest rates until after the UK leaves the EU at the end of March, assuming it does.”
Mr Archer forecast annual CPI inflation could dip below the 2% target this month because of the sharp overall fall in oil prices from a four-year high seen in October.
He added: “On the assumption the UK ultimately leaves the EU at the end of March with a deal, inflation could remain below 2% through 2019 and get as low as 1.6%. Further helping matters will be Ofgem’s price cap on domestic energy prices, which comes into effect from January. However, if there is a ‘no-deal’ UK exit from the EU next March, the inflation outlook will be clouded by a number of factors – most notably what happens to sterling, how well the economy holds up and which tariffs come into effect.”
Read More: Ian McConnell: Disgraceful increase in inequality will add to Tory economic damage
Why are you making commenting on The Herald only available to subscribers?
It should have been a safe space for informed debate, somewhere for readers to discuss issues around the biggest stories of the day, but all too often the below the line comments on most websites have become bogged down by off-topic discussions and abuse.
heraldscotland.com is tackling this problem by allowing only subscribers to comment.
We are doing this to improve the experience for our loyal readers and we believe it will reduce the ability of trolls and troublemakers, who occasionally find their way onto our site, to abuse our journalists and readers. We also hope it will help the comments section fulfil its promise as a part of Scotland's conversation with itself.
We are lucky at The Herald. We are read by an informed, educated readership who can add their knowledge and insights to our stories.
That is invaluable.
We are making the subscriber-only change to support our valued readers, who tell us they don't want the site cluttered up with irrelevant comments, untruths and abuse.
In the past, the journalist’s job was to collect and distribute information to the audience. Technology means that readers can shape a discussion. We look forward to hearing from you on heraldscotland.com
Comments & Moderation
Readers’ comments: You are personally liable for the content of any comments you upload to this website, so please act responsibly. We do not pre-moderate or monitor readers’ comments appearing on our websites, but we do post-moderate in response to complaints we receive or otherwise when a potential problem comes to our attention. You can make a complaint by using the ‘report this post’ link . We may then apply our discretion under the user terms to amend or delete comments.
Post moderation is undertaken full-time 9am-6pm on weekdays, and on a part-time basis outwith those hours.
Read the rules here