Oil price slump drives inflation down
LOWER fuel prices have pushed the rate of inflation down to a 12-year low, official statistics show.
The Consumer Prices Index inflation measure – which covers the cost of basic household goods – fell to a rate of 1% in November from 1.3% in October. The Retail Prices Index – which is includes housing costs –
If inflation falls below 1% the Bank of England would have to write a letter of explanation to the chancellor.
Inflation as measured by the Retail Prices Index fell to a five-year low of 2%, down from 2.3%.
The Office for National Statistics said falling fuel prices, caused by the decline in global oil prices, have brought the costs of both road and air travel down, with petrol prices down 5.9% in November.
Additionally, food prices fell by 1.7%, helped by supermarket price wars. Both food and fuel account for a large part of the ONS’ inflation calculations.
In the first few months of 2014, UK inflation generally rose, reaching 1.9% in June. But the recent low rate of inflation means that earnings are finally rising faster than prices, after years of failing to keep up.
The Bank of England, which targets an inflation rate of 2%, warned last month that the rate could drop below 1% in the next six months. The outlook means that the Bank is unlikely to raise interest rates from the historic low of 0.5% for some time.
