UK inflation has fallen to its lowest level since May 2000 after dropping to 0.5 per cent during December.
Figures from the Office for National Statistics (ONS) showed that inflation, measured by the Consumer Prices Index (CPI), declined one per cent during November to hit the record low during the final month of 2014. One of the driving forces behind this change was the impact of cheaper fuel prices, generated by falling global oil prices.
The results provide a boost for consumers who are starting to see a drop in petrol prices. Supermarket Asda has already confirmed that it would be slashing 2p off the price per litre bringing it down to 103.7p. One garage in Birmingham has gone even further setting its petrol prices below £1 at 99p per litre.
Announcing the results, the ONS said: "The 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."
The ONS also stated that the Retail Prices Index (RPI) measure of inflation also dropped from two per cent to 1.6 per cent. Alongside the falling the fuel prices, the ONS also highlighted the rise in gas and electricity prices in December 2013 fell out of the equation.
A drop below one per cent inflation means the Bank of England governor Mark Carney has to deliver a written explanation to the chancellor. The Bank had previously set a target of two per cent and the CPI rate is over one percentage point away from this prediction. Overall, however, George Osborne seemed happy with the rate.
The chancellor tweeted: "Inflation is 0.5 per cent – lowest level in modern times. Welcome news with family budgets going further & economic recovery starting to be widely felt."
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