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Inflation falls to 2.1pc

Sam Cordon

December 17, 2013

The fall in the rate was partially offset by upward contributions from the transport sector and some aspects of recreation and culture.

Samuel Tombs, UK Economist for Capital Economics, said: “The fall in UK CPI inflation from 2.2% to 2.1% in November confirms that the economy is enjoying a favourable mix of strong growth and low inflation.”

But Tombs said that the ONS calculated November’s inflation before the first spike in utility prices took place towards the end of the month so he expected inflation to edge up.

Next year though Capital Economics predicts that CPI will dip below the Bank of England’s target of 2%.

Tombs added: “As a result even if earnings growth recovers only marginally next year an end to the squeeze on real earnings is finally in sight.”

But there are concerns that a fall in inflation below 2% could trigger an increase in the base rate, as indicated in Governor Mark Carney’s forward guidance, although Carney has stressed that it is not automatic trigger but a flag to revisit the rate if necessary.

Mark Harris, chief executive of mortgage broker SPF Private Clients, said: “Even though CPI has fallen yet again fears of an interest rate rise sooner rather than later continue.

“However while the economy looks to be improving and unemployment falling the recovery is still tentative and there is a long way to go.

“The housing market is still some way off its peak in terms of prices and volume of transactions.”


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