U.K. Inflation Holds at Three-Year Low as BOE Decision Looms
Consumer prices rose 1.5% from a year earlier, matching the smallest increase since November 2016.
(Bloomberg) --
U.K. inflation held at its lowest rate in three years in November, providing ammunition for interest-rate doves as the Bank of England prepares to announce its final decision of the year.
Consumer prices rose 1.5% from a year earlier, matching the smallest increase since November 2016, the Office for National Statistics said Wednesday. Economists had forecast a fall to 1.4%.
The figures are nonetheless likely to reinforce the dovish tilt at the BOE, where policy makers Michael Saunders and Jonathan Haskel are expected to repeat their calls for lower interest rates on Thursday amid mounting signs of economic weakness.
Inflation is running well below the BOE’s 2% target, and at less than half the pace of earnings growth. The central bank expects it to slow further next year and stay below target until the second half of 2021.
Downward pressure on inflation came from tobacco prices, with the decision not to hold a budget in November meaning that duties remained unchanged. By contrast, they rose sharply a year earlier. The falling cost of overnight hotel stays also played a role.
Upward pressures came from food, including chocolate, tickets for live music events and package holidays.
Core inflation, which excludes tobacco along with energy, food and alcoholic beverages, stayed at 1.7% last month.
Stronger Pound
Inflation may be restrained in the months ahead by the sharp rise in the pound this year, which pushes down the cost of imports. Political optimism has seen sterling gain almost 11% against the currencies of Britain’s major trading partners since mid-August, leaving it on course for its best year since 2009.
Both S&P Global Ratings and Fitch Ratings improved their assessment of the U.K.’s credit outlook late Tuesday after Boris Johnson’s Conservative Party won a majority in last week’s election.
Other figures showed pipeline pressures remained subdued, with input prices falling 2.7% from a year earlier and output prices up just 0.5%, the least since 2016.
House prices in England and Wales rose 0.7% from a year earlier in October, the smallest increase since 2012. The worst-performing region was London, where prices declined 1.6% as uncertainty over Brexit and the election took its toll.
House prices in the U.K. capital have fallen 3.5% since their peak in July 2017, costing homeowners 17,000 pounds ($22,000). At 472,000 pounds on average, values nonetheless remain double what they were a decade ago.
To contact the reporters on this story: Andrew Atkinson in London at a.atkinson@bloomberg.net;David Goodman in London at dgoodman28@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson
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