UK inflation fell by 50 basis points to 0.5 per cent in December, the joint-lowest figure on record, says the Office for National Statistics.
The latest consumer prices index shows inflation dropped from 1 per cent in November 2014, and from 2 per cent in December 2013. The last time inflation fell to 0.5 per cent was in May 2000.
According to the ONS, stagnant gas and electricity prices in November – compared with energy price increases a year earlier – were a key contributor to the decrease in inflation.
Falling oil prices also led to lower diesel and petrol revenues than a year earlier, placing further downward pressure on the rate of inflation.
Separately, the retail prices index fell 40 basis points to 1.6 per cent between November and December.
Investec Wealth & Investment head of UK equities Guy Ellison says: “UK inflation undershot expectations for December, coming in at 0.5 per cent and driven by a combination of lower food and energy bills. Indeed, with the ongoing fall in the oil price there is a chance that headline CPI approaches 0% in the coming months.”
“The broader reaction to today’s data is likely to be modest weakness for sterling, as the need for the Bank of England to raise rates sooner rather than later to ward off inflation diminishes.”