UK inflation drops to 14-year low

<p>UK inflation fell to 0.5 per cent during December.</p>

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."

Find up to date information on the FTSE 100 and spread betting strategies at City Index.

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.