Hitting a 12-year low, UK inflation fell to 1 percent in November, according to the last CPI reading. Analysts had been predicting inflation would drop to 1.2 percent from 1.3 percent in October and attributed November’s sharp decrease to plunging oil prices as well as lower airfare and cuts to food and used car prices. Inflation is expected to fall further still in 2015.
“While we think that outright deflation will be avoided, it is clear that inflation is set to fall significantly below 1 percent over the coming months,” Paul Hollingsworth, an economist at Capital Economics, was quoted as saying by the UK Guardian. The November CPI reading is half of the Bank of England’s 2 percent target. The bank has been keeping interest rates at 0.5 percent and many market watchers were speculating that there would be an increase following the general election in May. But with inflation low, analysts are now forecasting that interest rates may not change until the third quarter.
