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UK inflation moves back into positive territory

  • 15/12/2015
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UK inflation moves back into positive territory
UK consumer price inflation rose by 0.1% in the year to November, according to figures from the Office for National Statistics.

This compares with a 0.1% fall the previous month.

The slight uptick in prices was largely due to fuel prices falling less this year than in November 2014, and rises in tobacco and alcohol prices. Falling clothing prices partially offset the rise.

Inflation has hovered around the zero mark since February.

The latest move into positive inflation territory is expected to be temporary.

“Today’s move into positive territory is likely to be short-lived with the massive fall in oil prices and the supermarket discount wars likely to keep a lid on UK inflation as we head into 2016,” said Maike Currie, associate investment director at Fidelity International.

“I expect UK CPI to continue see-sawing around the zero-mark for the near future.”

Persistently weak inflation means there is little incentive for the Bank of England to raise interest rates. Last week the Bank’s Monetary Policy Committee voted to keep the base rate at 0.5% for the 81st month in a row.

Currie added: “I don’t expect UK interest rates to rise in 2016, and the pace of future rises is likely to be a lot slower too. On the basis of the Bank’s own projections, the most we can hope for are two quarter point hikes in 2017, which means interest rates may be just 1% a decade after the start of the financial crisis.”

Ben Brettell, senior economist at Hargreaves Lansdown, said: “I see base rate remaining at 0.5% into the second half of next year, and quite possibly even longer than that.”

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