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January 13, 2015 0

Inflation has plunged to its lowest level since May 2000 – the fourth fall in inflation over a five-month period.

Inflation is falling rapidly, and has halved from 1% in November 2013 (as measures by the Consumer Prices Index) to 0.5% the month after. This could indicate lower interest rates for a longer period of time.

Factors influencing the fall in inflation are a drop in fuel prices and a slide in global oil prices.

December’s drop in inflation could also suggest welcome real wage increases for UK workers, as recent years have seen inflation consistently overtake wage growth.

Bank of England governor Mark Carney will be required to write an open letter to the chancellor explaining why inflation is over 1% lower then the Bank of England’s 2% target. This will be published on 11th Feb 2014.

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