UK inflation falls to targeted 2%

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London - UK inflation unexpectedly slowed last month, reaching the Bank of England’s 2 percent target for the first time in more than four years.

Consumer price growth slowed from 2.1 percent in November, last year the Office for National Statistics said in London yesterday. The median of 32 estimates was for it to remain unchanged.

There was downward pressure on inflation from food prices last month, offsetting an upward effect from electricity and gas and petrol costs.

Cooling inflation may allow the Bank of England to keep interest rates at a record low for longer to help the economic recovery build momentum. Its monetary policy committee, which has said it would not consider a raise at least until unemployment fell to 7 percent, kept the benchmark rate at 0.5 percent last week.

“With pipeline inflation pressures at such low levels there is growing optimism that consumer prices will stay close to target this year,” said James Knightley, an economist at ING Bank. “With the labour market strengthening we will hopefully see wages start to pick up to the extent that incomes are rising faster than the cost of living.”

Headline inflation had been above the bank’s goal every month since December 2009. – Bloomberg


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