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UK inflation rate slips to 3%, the first fall for six months UK inflation rate slips to 3%, the first fall for six months
(35 minutes later)
Squeeze on households eases slightly as effects of weak pound start to waneSqueeze on households eases slightly as effects of weak pound start to wane
Richard PartingtonRichard Partington
Tue 16 Jan 2018 10.29 GMTTue 16 Jan 2018 10.29 GMT
Last modified on Tue 16 Jan 2018 11.01 GMT
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The squeeze on British households showed signs of easing in December as the rate of inflation fell for the first time in six months, amid lower airfare costs and a fall in the price of games and toys.The squeeze on British households showed signs of easing in December as the rate of inflation fell for the first time in six months, amid lower airfare costs and a fall in the price of games and toys.
The consumer price index eased to 3% last month from a five-year high of 3.1% in November, raising the prospect that inflation may have peaked, easing some of the pressure on UK consumers. Economists had expected the rate to moderate as the effects from the fall in sterling since the Brexit vote – which pushed up the cost of importing food and fuel – begin to wash out of the system.The consumer price index eased to 3% last month from a five-year high of 3.1% in November, raising the prospect that inflation may have peaked, easing some of the pressure on UK consumers. Economists had expected the rate to moderate as the effects from the fall in sterling since the Brexit vote – which pushed up the cost of importing food and fuel – begin to wash out of the system.
The Office for National Statistics said the slowing rate of growth was partially offset by higher tobacco prices, reflecting the duty increases that came into effect following the budget, as well as a rise in petrol and diesel prices. The office for National Statistics said the slowing rate of growth was offset partially by higher tobacco prices, reflecting the duty increases that came into effect following the budget, as well as a rise in petrol and diesel prices.
The Bank of England has previously said it expected the CPI to peak in the final months of 2017, before falling back to about 2.4% at the end of this year. That would be above its 2% target rate, which it said was justification for raising interest rates even as inflation fades. The Bank of England has previously said it expected the CPI to peak in the final months of 2017 before falling back to about 2.4% at the end of this year. That would be above its 2% target rate, which it said was justification for raising interest rates even as inflation fades.
However, statisticians at the ONS said it could be too early to tell if the drop last month was the start of any longer-term reduction in the rate of inflation. British households are also still coming under pressure from weak wage growth, which stood at 2.3% in the three months to October, and could remain below the rate of inflation this year.However, statisticians at the ONS said it could be too early to tell if the drop last month was the start of any longer-term reduction in the rate of inflation. British households are also still coming under pressure from weak wage growth, which stood at 2.3% in the three months to October, and could remain below the rate of inflation this year.
Although the Bank may still look to raise interest rates from 0.5%, pushing the cost of borrowing to levels unseen since before the financial crisis, economists said there were still difficult patches ahead for the economy, which may be unsettled by the Brexit negotiations.Although the Bank may still look to raise interest rates from 0.5%, pushing the cost of borrowing to levels unseen since before the financial crisis, economists said there were still difficult patches ahead for the economy, which may be unsettled by the Brexit negotiations.
Suren Thiru, the head of economics at the British Chambers of Commerce, said the most preferential option was therefore “a prolonged period of monetary stability, to keep interest rates steady over the near term”. Suren Thiru, the head of economics at the British Chambers of Commerce, said the best option was therefore “a prolonged period of monetary stability, to keep interest rates steady over the near term”.
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InflationInflation
EconomicsEconomics
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