UK inflation on target at 2%

The Momentum UK Team 14 January 2014

Consumer price inflation dropped to the Bank of England’s target for the first time since 2009, according to the Office for National Statistics (ONS).

In December 2013 inflation was measured at the target of 2%, as set by the Monetary Policy Committee, this was down from 2.1% in November 2013.

Inflation measures changes to the cost of living by comparing the cost of goods and services year-on-year. A positive inflation rate means prices have risen, and a negative means that they have decreased.

The drop was relatively unexpected and the various contributing factors identified by ONS include: lower food prices, non-alcoholic beverages and recreational goods and services, although these are thought to be countered by an increase in fuel and energy prices. Opinion is divided as to whether the widespread discounting before Christmas this year occurred early enough to have an impact on inflation.

Prime Minister David Cameron, @david_cameron, tweeted in response to the news:

“It's welcome news that inflation is down & on target. As the economy grows & jobs are created this means more security #forhardworkingpeople”

The Bank of England has previously pledged that it will not increase the cost of borrowing until unemployment decreases to 7%, in a bid to support the recovery of the economy.

Catherine McKinnell, Labour Treasury spokeswoman, said:

"This small fall in the inflation rate is welcome, but with prices still rising more than twice as fast as wages the cost-of-living crisis continues.

"After three damaging years of flat-lining, working people are on average £1,600 a year worse off under the Tories."

The Retail Prices Index in December 2013 was calculated to be 2.7%, rising slightly from 2.6% in November 2013.