Bank of England could cut rates as UK inflation holds at 2.1% in December
Written by admin on January 15th, 2008 in UK economy.
Figures released toady by the Consumer Prices Index show UK inflation remained steady in December.
The Consumer Prices Index is the governments preferred measurement for UK inflation, and in December the figure held at 2.1% for the third consecutive month.
Putting the most pressure on UK inflation was the continuing high prices of food according to the Office for National Statistics.
While the rise in the cost of food was offset by falling electricity and gas bills in December (7% annual decline in - the steepest such fall since comparable records began in January 1997), preventing annual CPI inflation moving higher still, energy companies are starting to rise their prices once again.
The Retail Price Index inflation measurement, which includes mortgage interest payments, eased to 4% from 4.3% in November.
Although holding at 2.1% the UK inflation figure still holds above the Bank of England’s 2% target figure, which continues to highlight the dangers of rate cuts in order to boost economic growth.
The figures were released at the same time as additional figures which showed annual factory gate price inflation running at its highest rate for more than 16 years.
The MPC cut base rates from 5.75% to 5.5% on December 6, and economists are forecasting a further quarter-point reduction next month. This data will however provide the MPC with food for thought as it weighs worrying price pressures against the increasing danger of a sharp economic slowdown.
