Inflation falls to 2% target

14 January 2014

Inflation has fallen to its target level of 2% for the first time since November 2009, according to the Office for National Statistics.

The ONS says that inflation measured by the Consumer Prices Index (CPI) fell from 2.1% in November 2013 to 2% the following month.

The greatest downward pressures came from food and non-alcoholic beverages and recreational goods and services. However, the ONS points out that these were partially offset by upward pressure from motor fuels and an overall increase in the price of gas and electricity.

Samuel Tombs, UK economist at Capital Economics, says food price inflation was the prime contributor to the downward movement, having fallen sharply from 2.8% to 1.9%.

He adds that the inflation rates looks set to continue lower over the coming months as utility companies pass on tax cuts in the spring and agricultural commodity price falls filter through.

"[Inflation falling will be] helping real earnings to finally recovery and enabling the MPC to leave interest rates on hold this year regardless of the unemployment figures," says Tombs.

This article was written for our sister website Money Observer

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