The UK's rate of inflation fell to just 1 per cent in November -its lowest level in 12 years - on the back of plunging fuel costs, official figures showed.
The consumer price inflation (CPI) figure dipped well below the 1.2 per cent expected by City analysts and, given the continued decline in global oil prices this month, makes it still more probable inflation will now soon dip below the 1 per cent mark.
Bank of England Governor Mark Carney said last month that inflation is "more likely than not" to keep falling in the coming months and that growth will be slightly weaker due to a global slowdown.
If inflation falls below 1 per cent, Carney will have to write a letter to George Osborne explaining why it is over a percentage point below the Bank's 2 per cent target.
Economists also said the weak inflationary pressures could push back the timing of the Bank’s first interest rate rise, which markets are currently pricing in for next autumn. “It gives the BoE plenty of room to leave policy ultra-loose” said James Knightley of ING.
Meanwhile, the Retail Prices Index fell to a five-year low of 2 per cent, down from 2.3 per cent in October.Reuse content