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London - A surge in air fares produced a modest pickup in UK inflation in December as lower food prices kept the rate well below the Bank of England’s (BoE) target.
Prices rose an annual 0.2%, the most since January, following a 0.1% gain in November. Core inflation, which excludes volatile food and energy prices, accelerated to 1.4%, the highest in almost a year, from 1.2% the previous month, the figures from the Office for National Statistics in London show.
With oil at a 12-year low and pay pressures weakening, BoE officials appear to be in no hurry to follow the Federal Reserve in raising interest rates from a record low.
Gertjan Vlieghe, the newest member of the Monetary Policy Committee, said on Monday that the lack of price pressure warranted patience. That view may be reinforced when Governor Mark Carney delivers his first public comments this year in a speech at noon in London.
“December’s consumer prices release confirmed that deflation is in the rear-view mirror but there aren’t yet any signs which will worry the MPC,” said Scott Bowman, an economist at Capital Economics in London.
“Inflation will be going nowhere fast - it is set to only average around 1% this year - and the MPC will be in no rush to push through the first rate hike.”
The caution among policy makers is partly caused by a loss of momentum in the global economy. The International Monetary Fund (IMF) cut its world growth outlook to 3.4% this year, down from a projected 3.6 percent in October, and China, the second- largest economy, had its weakest quarter since 2009 at the end of last year.
The 0.1 percentage-point pickup in UK inflation was forecast by economists in a Bloomberg survey. The pound rose after the data were published, and traded at $1.4310 at 12:27, up 0.5% from yesterday.
