Inflation dips to four-year low Further encouraging news on the economy was announced in mid December

UK inflation measured by the Consumer Prices Index (CPI) fell to 2.1% in November, down from the previously reported 2.2%. This is a four-year low and brings the core inflation rate (excluding food and energy) to below 2%.

 The Office for National Statistics (ONS), who compile the data, cites lower food, transport, and utility prices as the major factor in this decline. However, they warned that recently announced increases in energy prices have not yet filtered through the system and therefore they will impact the next set of inflation figures, relating to December, adversely.

At the same time the wider Retail Prices Index (RPI) growth was unchanged at 2.6%. These lower figures will be welcomed by most consumers, as inflation has been a problem for them with annual weekly wage increases only averaging 0.9% recently and therefore creating a squeeze on family budgets. Meanwhile the Governor of the Bank of England (BoE), Mark Carney, was also pleased, as he has avowed to meet the inflation target of 2%, set by the Government, even though the figure has been above this level since November 2009.Good progress has been made though, given that the CPI figure was above 5% just two years ago.

The historically low interest rates of 0.5% are a cornerstone of the BoE’s policy and Dr Carney has stated that he will not increase these until the UK’s
unemployment rate dips below 7%; it is currently at 7.4% for the previous August-October quarter. If, however, inflation continues to remain subdued, he will be able to maintain these low interest rates beyond that time, helping businesses and consumers alike.

Property prices are not helping him here though, with the ONS reporting a 5.5% increase in UK house values since October 2012.

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