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Game-changer: UK inflation just sank even lower than anyone predicted
UK consumer price inflation slid to 0.5% in December, equalling its lowest ever level. Mischa Frankl-Duval explains what that means.
UK inflationhas fallen tojust 0.5% that means interest rates may not rise this year
What happened?
CPI 12-month inflation rate for the last ten years
Source: Office for National Statistics
Sterling was trading at a low of $1.5083 following the announcement, down from $1.5119 immediately before it. The yield on five-year gilts also fell, to below 1%.
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Join more than 165,000 subscribers and keep yourself informed with latest financial news, insights and expert analysis to help you understand what really matters when it comes to your finances.
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The figures released this morning by the Office for National Statistics (ONS) fell well short of the government's official target of 2%, though George Osborne did his best to put a positive spin on the results:
"Inflation is 0.5% - lowest level in modern times", the Chancellor tweeted. "Welcome news with family budgets going further & economic recovery starting to be widely felt."
"Most economists expect inflation to continue to fall over the next few months, with oil prices at a near six-year low amid concerns of a bigger oil surplus in coming months." said the Financial Times.
"The rapid fall in crude prices is likely to deliver a spending boost to hard-pressed consumers."
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Mischa graduated from New College, Oxford in 2014 with a BA in English Language and Literature. He joined MoneyWeek as an editor in 2014, and has worked on many of MoneyWeek’s financial newsletters. He also writes for MoneyWeek magazine and MoneyWeek.com.
