Inflation plunges to 0.5% in December
THE rate of inflation is at the joint lowest level since records began.
The Consumer Prices Index (CPI), which measures changes in the prices of the goods and services bought by households, grew by 0.5% in December, down from 1% in November. The CPI was previously 0.5% in May 2000.
Main contributions to the fall came from the December 2013 gas and electricity price rises falling out of the calculation and the continuing drop in motor fuel prices.
Inflation is now one and a half percentage points below the Bank of England’s 2% target so governor Mark Carney will have to write a letter to chancellor George Osborne to explain why. The letter doesn’t have to be published until February 18, along with the minutes of the Monetary Policy Committee’s next scheduled meeting.
In December 2013 a number of the major utility companies raised their prices. In contrast there were no increases in December 2014. The price of petrol and diesel at the pump continues to fall and this has also contributed to the lower rate of inflation. Petrol and diesel prices are now almost 25p per litre below their peak prices in April 2012.
While the rate of inflation fell, there was some upward pressure from prices for alcohol – notably wine and spirits. Prices, overall, usually fall for alcohol in the run up to Christmas. In 2014 the majority of the fall came in November, with the ensuing December fall being smaller than usual.
