By Menna Abbas
There was a surprise rise in the UK’s inflation rate to 0.2 per cent in December 2015, the first month since January 2015 in which the rate exceeded 0.1 per cent according to the Office for National Statistics (ONS).
Britain’s consumer price index (CPI) grew by 0.1 per cent month-on-month in December, while analysts had expected growth to remain stagnant, as it had been in the previous month.
Monthly inflation has been between -0.1 per cent and 0.1 per cent for the past 11 months, with low oil prices and a fiercely competitive environment for supermarkets keeping prices down for consumers.
The renewed slide this year in the oil price is shaking central bankers’ confidence that inflation will begin to edge higher once the effects of failing crude wash out of official statistics. However, for 2015 as a whole, consumer price inflation averaged 0 per cent, its lowest level since comparable records began in 1950. “CPI inflation will continue to rise in early 2016, as the drag from lower oil prices continues to fade and food inflation begins to strengthen, now that supermarkets have passed on all of the fall in wholesale prices,” Samuel Tombs, chief UK economist at Pantheon Macroeconomics said to IBM Times. “And while CPI inflation probably will take until May to reach 1%, this will not necessarily preclude an interest rate rise in the second quarter of this year.”
Meanwhile, the core CPI, which strips out volatile components such as food and energy, rose to 1.4 per cent in December from 1.2 per cent the previous month, prompting analysts to suggest the upward trend could offer some support to those hoping that the Bank of England would raise interest rates.
“The Bank of England’s most recent minutes reiterate its expectation for inflation to increase modestly in the coming months, though they also note that continued weakness in the oil price makes it likely this will be more gradual than previously forecast,” Ben Brettell, senior economist at Hargreaves Lansdown said to IBM Times.
