UK inflation slows to three-year low
The UK’s inflation rate fell to its lowest for more than three years in December, official figures show.
The Consumer Prices Index rate dropped to 1.3% last month, down from 1.5% in November, the Office for National Statistics (ONS) said.
A fall in the price of women’s clothes and hotel stays helped the drop.
The slower rate of price increases comes as the Bank of England is considering whether to cut interest rates.
On Wednesday, Michael Saunders, one of the rate setters at the Bank, reiterated his view that borrowing costs should be lowered.
Last week, two other rate setters and Bank governor Mark Carney suggested that rates could be cut, depending on how the economy performs.
“It probably will be appropriate to maintain an expansionary monetary policy stance and possibly to cut rates further, in order to reduce risks of a sustained undershoot of the 2% inflation target,” Mr Saunders said in a speech.
“With limited monetary policy space, risk management considerations favour a relatively prompt and aggressive response to downside risks at present.”
On Sunday, fellow rate setter Gertjan Vlieghe told the Financial Times he would consider voting for a rate cut depending on how the economy has performed since the December election.
The Bank’s main interest rate is used by banks and other lenders who set borrowing costs.
It affects everything from mortgages to business loans and has a big effect on the finances of individuals and companies.