CPI falls to 2.1%; lowest level for almost two years

The Consumer Prices Index fell to 2.1 per cent in December 2018, down from 2.3 per cent in November 2018, new statistics from the Office for National Statistics has revealed.

It is the lowest level of inflation for nearly two years, with the country ending 2018 with inflation just above the Bank of England’s 2 per cent target, Aegon head of pensions, Kate Smith, noted.

“Next week’s earnings figures will show how this impacts on the gap between inflation and wage growth, although if the current positive trend continues, we may see real wage growth consistently above 1 per cent in the early part of 2019.

“However, with Brexit on the horizon and the uncertainty around what deal the UK will leave the EU with, it is still unclear what the inflationary pressures this may bring and whether households will continue to feel an ease in the cost of living or whether this might be swept away.

“For now, today’s figure will be a welcome relief from the inflationary squeeze on incomes a year ago and while we experience a period of falling inflation and wage growth, individuals should look to develop a saving habit so that any increase in disposable income can be put towards a long term savings vehicle. Just a small increase today will prove extremely beneficial to any future savings.”

In addition, the ONS revealed that the Consumer Prices Index including owner occupiers’ housing costs (CPIH) fell to 2 per cent in December 2018, down from 2.2 per cent in the previous month.

The ONS said the largest downward contributions to change in the 12-month rate came from falls in petrol prices and from airfares, where ticket prices rose between November and December 2018, but by less than a year ago.

These downward effects were offset by upward contributions from a variety of categories including accommodation services and, to a lesser extent, mobile phone charges, games, toys and hobbies, and food.

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