LONDON–Britain’s 12-month inflation slowed to the target rate of 2.0 percent in December and to the lowest level for more than four years, official data showed on Tuesday. At 2.0 percent, the rate was the lowest level since November 2009, when it last hit the target.
The Bank of England’s main task is to use monetary policy as a tool to keep annual inflation close to a government-set target of 2.0 percent, in order to preserve the value of money. Annual inflation had stood at a four year-low point of 2.1 percent in November, the Office for National Statistics confirmed. “The Consumer Prices Index (CPI) grew by 2.0 percent in the year to December 2013, down from 2.1 percent in November,” said a statement by the ONS.
“The largest contributions to the fall in the rate came from prices for food & non-alcoholic beverages and recreational goods & services. These were partially offset by an upward contribution from motor fuels.” This helped to offset a rebound for Britain’s housing markets, particularly in London. The annual CPI rate has held above this target level since November 2009 but has dropped from a level of more than five percent in the space of two years. The slowdown comes as inflation drops in many advanced economies, including the United States and eurozone, a reflection of subdued demand and weak commodity prices worldwide according to analysts. With inflation low, and British unemployment not yet below 7.0 percent, the Bank of England is likely to keep its main interest rate at a record-low level of 0.50 percent this year.