UK inflation falls less than expected

Inflation in the UK has fallen more than expected in November after data released today by the Office for National Statistics show that consumer prices have fallen by 0.1 percent bringing the annual inflation rate down to 4.1 percent from 4.5 percent the previous month.

The Retail Prices Index inflation rate, inclusive of housing costs, has fallen to 3% in November, from 4.2% in October.

Despite this drop the annual inflation rate is still above the forecast of 3.9 percent and is double the Bank of England’s 2 percent target.

However policymakers are convinced that inflation is no longer a threat and so the figures are unlikely to change the view of the need for further aggressive rate cuts.

The CPI rate of inflation still remains above the government’s target, therefore the Bank of England governor, Mervyn King, will have to write another letter to the chancellor to offer an explanation.

The figures are likely to deter consumers from delaying making large scale purchases in the hope that prices will soon fall, which is likely to add to the downturn and spending will slowdown further.

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