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UK Economy
Oil and food prices drive inflation to lowest since 2002
From the Financial Times of Tue, 16 Dec 2014 10:03:02 GMT

Falling oil and food prices have driven UK inflation to its lowest level in over a decade.

The consumer price index rose by just 1 per cent in the year to November, the Office for National Statistics said on Tuesday, down from 1.3 per cent in October.

This is the lowest level since 2002 and most economists are expecting the rate to fall further over the coming months, remaining well below the Bank of England’s 2 per cent target.

BoE governor Mark Carney will have to write a letter of explanation to the chancellor if inflation falls below 1 per cent.

Food and oil prices have traditionally been among the main causes of inflation but in the year to November food prices fell by 1.7 per cent and motor fuels by 5.9 per cent.

There was also downward pressure from the cost of electronics, such as PCs and computer games where prices rose by less than a year ago.

Danny Alexander, Liberal Democrat chief secretary to the Treasury, said the fall was a “welcome early Christmas present to millions of families across the country” and said he was determined to ensure that further oil price falls would be passed on to consumers “as quickly as possible and in full.”

Investors jumped on the weaker figures to pare back their expectations for interest rate rises and briefly pushed the 30-year gilt yield below 2.5 per cent for the first time in history.

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