This article is from the source 'bbc' and was first published or seen on . It last changed over 40 days ago and won't be checked again for changes.
You can find the current article at its original source at http://www.bbc.co.uk/news/business-29611742
The article has changed 7 times. There is an RSS feed of changes available.
Version 2 | Version 3 |
---|---|
UK inflation rate of 1.2% is lowest in five years | |
(35 minutes later) | |
The UK inflation rate, as measured by the Consumer Prices Index, fell to 1.2% in September from 1.5% the month before, official figures show. | The UK inflation rate, as measured by the Consumer Prices Index, fell to 1.2% in September from 1.5% the month before, official figures show. |
The rate is the lowest since September 2009, when it was 1.1%. | The rate is the lowest since September 2009, when it was 1.1%. |
Lower energy and food prices helped to cut the rate, while the Office for National Statistics (ONS) also cited cheaper transport costs as a factor. | |
The news sent the pound lower as it makes an interest rate rise, which was expected next spring, less likely. | |
The Retail Prices Index measure of inflation fell to 2.3% from 2.4% in August. | The Retail Prices Index measure of inflation fell to 2.3% from 2.4% in August. |
The CPI is the rate the Bank of England targets and it is charged with keeping inflation at about 2%. | |
The UK economy is the fastest growing in the developed world, something that would normally prompt a rise in interest rates. | |
Analysis: Brian Milligan, Personal finance reporter, BBC News | |
September's inflation figures are no longer as critical as they were. They used to determine the level of a wide range of benefits. But most are now subject to the cap of a 1% annual rise, which began in April 2013. If the Conservatives win the next election, those same benefits will also be subject to a two-year freeze. | |
Disability benefits are one exception. If approved by the government, they will now be uprated by 1.2% next year. | |
In theory, the state pension is also set by September's inflation figures, but in this case, it will be protected by the "triple-lock" of inflation, earnings or 2.5% - whichever is the highest. | |
Many economists were pencilling in February next year as the likely date for a rise in rates from their current record low of 0.5% to 0.75%. | |
"With inflation predicted to fall further in the coming months, those hoping for a pre-election interest rate rise are highly likely to be disappointed," said Ben Brettell, senior economist at Hargreaves Lansdown. | "With inflation predicted to fall further in the coming months, those hoping for a pre-election interest rate rise are highly likely to be disappointed," said Ben Brettell, senior economist at Hargreaves Lansdown. |
The pound reacted immediately to the news, falling against both the euro and the dollar. | The pound reacted immediately to the news, falling against both the euro and the dollar. |
Sterling is at $1.597, its lowest since November last year. | Sterling is at $1.597, its lowest since November last year. |
Wages lag | Wages lag |
The ONS figures showed the cost of fuel has fallen 6% from September last year, while food prices are down 1.5% as the supermarket price wars begin to take effect. | The ONS figures showed the cost of fuel has fallen 6% from September last year, while food prices are down 1.5% as the supermarket price wars begin to take effect. |
The fight for market share between leading supermarkets is intensifying and the downward pressure on food prices is expected to continue to press down on inflation. | The fight for market share between leading supermarkets is intensifying and the downward pressure on food prices is expected to continue to press down on inflation. |
Earlier, a survey by the British Retail Consortium (BRC) reported sales at their weakest level in six years. | Earlier, a survey by the British Retail Consortium (BRC) reported sales at their weakest level in six years. |
It said shoppers had put off seasonal purchases because of the warm weather, It also said annual food prices had fallen for the first time in five years. | It said shoppers had put off seasonal purchases because of the warm weather, It also said annual food prices had fallen for the first time in five years. |
However, the ONS said that the biggest factors behind the fall in September's inflation rate were cheaper transport costs (notably sea fares and air fares) and lower prices for a range of recreational goods, including items such as tablet computers and games consoles. | However, the ONS said that the biggest factors behind the fall in September's inflation rate were cheaper transport costs (notably sea fares and air fares) and lower prices for a range of recreational goods, including items such as tablet computers and games consoles. |
Despite the fall in inflation, average income is not keeping up. Last month's official figures showed average earnings, excluding bonuses, in the May to July period rose by 0.7% from a year earlier. | Despite the fall in inflation, average income is not keeping up. Last month's official figures showed average earnings, excluding bonuses, in the May to July period rose by 0.7% from a year earlier. |
Benefits | |
New figures on employment and income are being released on Wednesday, | New figures on employment and income are being released on Wednesday, |
Until December last year, the CPI had outstripped the Bank's 2% target every month for five years. | |
It has now been under that for nine months in a row. | |
Bank of England governor Mark Carney has to write a letter to the chancellor if it deviates by one percentage point from the 2% benchmark. | |
The September inflation figure was typically the one that the government used for setting increases in state pension and a range of other benefit levels. | |
From next April, it is capping most benefit increases by 1%, although pensions are governed by a different formula that guarantees they will not rise by less than 2.5%. |