Fidelity International

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Cheaper hotel costs, the inflation rate slide helped down

The UK's inflation rate fell to the lowest in More Than three years in December, increasing speculation that interest rates could be lowered.

according to 1. 5% in November, which cost, in part, to a decline in The Price of women's clothing and hotel rooms.

in December, the inflation rate is the lowest since November of 2016.

analysts said, it increases the chances of a rate cut, with inflation below The Bank of England's target of 2%.

"Very soft UK inflation data for December, leaves the door wide open for a Bank of England interest rate cut on 30. In January," said Melissa Davies, an economist at Stock Broker Redburn.

The Bank rate at the expense of banks and other lenders, of the credit.

It affects everything from mortgages, business loans, and has a great effect on the finances of individuals and businesses.

City-traders, who spend their professional lives in order to superior to are convinced from moves in interest rates, is that it still has today: The Bank of England is likely to be the official interest rate cut when it meets later this month. Market indicators suggest that there is a 60% chance that it happens.

Here is the idea: 1. 3%, the official measure of consumer price inflation in the year to December, lower than expected and significantly below the 2% target. With the economy barely growing (even shrinking when you are ready, leave to the official November estimate of 0. 3% shrinkage), there are little signs of inflationary pressure in the near future.

Granted, there was a sharp increase in The Price of crude Oil - a barrel of was to 4. 9% in the month and 17. 4% on the year. But still, the producers were still paying a little less for their raw materials and supplies than in the previous year.

it was assumed that the November contraction was just a temporary period of weakness, induced by pre-election political Uncertainty and that it is a recovery, as businesses and consumers the confidence to spend and invest.

have to fight The danger of the MPC, is that the hoped-for post-election recovery does not materialise.

Earlier on Wednesday, Michael Saunders , one of the rate-setters on The Bank 's Monetary Policy Committee (MPC), reiterated its view that borrowing costs should be reduced.

"It will probably be appropriate to continue an expansionary Monetary Policy and possibly cut rates further in order to reduce the risks and sustainable undershooting the 2% inflation target," he said.

last week, two more rate setters and Bank Governor Mark Carney also suggested that the prices could be reduced, depending on how the economy performs.

On Sunday, MPC member Gertjan Vlieghe told the Financial Times, depending on how the economy has already taken off since the December election

the members of the MPC could make the current inflation figure with a pinch of salt, said Samuel Tombs , chief UK economist at Pantheon macroeconomics.

"half of The Decline in the overall inflation was driven by a sharp decline in the volatile airline rates, inflation," he said.

He expects inflation to rise to 1. 6% in The First three months of the year 2020, and this could mean waiting for enough MPC members to decide, rather than voting to lower interest rates.

Emma-Lou Montgomery, associate director of the personal investment of money manager Fidelity International , said that the inflation data painted a precarious picture for the British economy than before.

"Today, the UK CPI figures just add to the growing feeling of discomfort that many feel when considering the prospects for the British economy, the inflation rate was also below The Bank of England's target of 2%. "

A cut to facilitate the finances of the borrower would, but create a more difficult environment for savers, she added.

office for national statistics, uk economy, personal finance, inflation, bank of england

Source of news: bbc.com