14 Jan 2015
Inflation fell to 0.5% in December, the lowest rate since May 2000, the latest figures from the Office for National Statistics have revealed.
The Consumer Prices Index (CPI) grew by 0.5% in the year to December 2014, compared with 1% in November. The sharp drop has been attributed partly to falling fuel prices.
Chancellor George Osborne has insisted that the latest fall in inflation is ‘welcome news’ for families and a recovering economy, and has sought to distinguish the situation in the UK from the problems with deflation currently being experienced in the eurozone.
Bank of England governor Mark Carney also sought to offer reassurance on the economic implications, arguing that keeping interest rates at record lows could help to mitigate low inflation.
However, the news has sparked concerns among economists and some business groups regarding the potentially damaging effects of deflation, including an outright drop in prices.
TUC general secretary Frances O’Grady said, ‘0.5% inflation shows how fragile the economy is, not just in the UK but also globally’.
‘While low inflation means we are finally seeing real wages start to rise, it will be many years before they are restored even to their pre-crisis levels…We need a strong and sustainable wages recovery, built not just on falling inflation, but on higher pay settlements and more decent full-time jobs.’