Financial News

  • 18 December 2013, 9:23

Inflation Falls To Four-Year Low Of 2.1%

The annual rate of inflation hit a four-year low last month of 2.1% as recent energy price increases are yet to feed in to the figures.

TheConsumer Prices Index (CPI) measure eased from 2.2% in October - partly due to falling fruit and vegetable prices.

The rises to energy bills are expected to make a large upward contribution to December's inflation figures.

The easing of inflation in November takespressure off the Bank of England as it attempts to help bring the CPI measure back towards its target of 2% - giving it plentyof breathing space to keep interest rates low even as the economy picks up.

And the slowdown could be seen as providing at least a crumb of comfort to squeezed households where wage growth continues to lag behind the rise in the cost of living.

The CPI rate of 2.2% in October was sharply lower than September's 2.7%.

The Bank's interest rate setters have had to loosen their focus on inflation, maintaining ultra-low borrowing rates to help nurse the economy back to health.

But pressure to tighten monetary policy would increase if inflation started rising.

Cost-of-living increases are still outstripping pay rises, with the last published figures showing wage growth at 0.8%.

Meanwhile, the cost of filling a Christmas stocking has gone up, with games, toys and hobbies up 2.8% on October, taking the annual increase in prices in the sector up to 1.8%.

Restaurants and hotels increasing their rates by a smaller amount made a downward contribution to inflation.

Petrol prices also fell in November, but less steeply than last year, meaning they made an upward contribution to the overall rate.

The CPI rate has not been lower since November 2009, when it stood at 1.9%.

A separate measure of inflation, the retail prices index (RPI), which includes housing costs, remained the same at 2.6%.

Catherine McKinnell MP, Labour's Shadow Economic Secretary to the Treasury, said of CPI: "This small fall in the inflation rate is welcome, but with prices still rising much faster than wages the cost-of-living crisis continues.

"Families and pensioners are still set to face inflation-busting hikes in energy prices this winter, which the ONS says are not in today's figures.

"After three damaging years of flatlining, working people are on average 1600 a year worse off. But the Autumn Statement failed to set out a plan to tackle the cost-of-living crisis and earn our way to higher living standards for the many and not just a few."

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