Tuesday, December 10, 2019
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UK inflation below target for 1st time in 4 years

London: Britain’s inflation rate slipped in January below the official 2 per cent target for the first time since 2009, making it less likely that the Bank of England will move soon to raise interest rates.

Official figures on Tuesday showed consumer prices were up 1.9 per cent in the year to January, down from the 2 per cent rate in December. The drop was due to retailers slashing prices on furniture and other categories.

Chris Williamson, the chief economist of Markit, described the combination of falling inflation and strong economic growth as a “Goldilocks” scenario. The Bank of England’s policymakers will be able “to keep their foot on the accelerator for longer via lower interest rates to help drive a strong and more sustainable recovery”.

Until recently the bank had been indicating that its key interest rate would remain at the record low of 0.5 per cent until joblessness fell to a more tolerable level. Once that unemployment threshold neared, Mark Carney, the bank’s governor, decided to update the so-called forward guidance to broaden the range of indicators that would be considered before rates are raised.

The low inflation number will give the bank even more freedom to let the economy strengthen before deciding to act on rates.