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16 January 2018
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| The inflation rate(The Total Investment & Insurance Solutions) |
The inflation rate in Britain dipped in December for the first time in
six months, partly due to a fall in the price of games and toys in the run-up
to Christmas, official figures showed Tuesday. The Total Investment & Insurance
Solutions
The Office for National Statistics said the annual rate of consumer
price inflation fell to 3 percent in December from 3.1 percent the previous
month. Another factor behind the decline was that airfares rose by less than
they had in the same period the year before. Inflation would have fallen by
more had it not been for higher tobacco prices, partly linked to tax increases.
Inflation in Britain spiked sharply higher after the country voted to
leave the European Union in June 2016, a decision that saw the pound tank. That
stoked inflation by raising the cost of imported goods such as food and oil.
Inflation rose so much that the Bank of England decided in November to raise
its main interest rate for the first time in a decade even though uncertainties
around Brexit have slowed the wider economy. The Total Investment & Insurance
Solutions
"Inflation has been running at roughly the same rate since last
spring following significant increases, partly due to the weaker pound after
the European referendum," said James Tucker, the statistics agency's
senior statistician. "It remains too early to say whether today's slight
fall is the start of any longer-term reduction in the rate of inflation." The Total Investment & Insurance
Solutions
However, with the impact of the pound's drop falling out of the annual
data, many economists expect a steady decline in inflation this year toward the
Bank of England's target of 2 percent. Also likely to weigh on inflation is the
quarter-point interest rate hike to 0.5 percent, which should slightly raise
the cost of borrowing to consumers, as well as tepid economic growth. From
being the fastest-growing economy among the Group of Seven industrial nations,
Britain is now one of the slowest, with much of the growth reliant on a booming
European economy.
"Given the continued headwind posed by Brexit uncertainty, I don't
see why the Bank of England would rush to raise rates again this year,"
said Ben Brettell, senior economist at stockbrokers Hargreaves Lansdown.
Britain is due to leave the EU in March 2019 and the government is
hoping to wrap up a wide-ranging post-Brexit trade deal with the EU by the fall
to allow parliaments across the region to be able to give their backing. The
British government hopes it will be able to agree on a transition period with
the EU by the end of the first quarter this year, which will give businesses
the ability to plan ahead.The Total
Investment & Insurance Solutions
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