UK's annual inflation hits 2% target

Tuesday 14 January 2014 16.46
UK inflation rate at lowest level since November 2009
UK inflation rate at lowest level since November 2009

Britain's 12-month inflation slowed to the target rate of 2% in December and to the lowest level for more than four years, official data showed today.

At 2%, the rate was the lowest level since November 2009, when it last hit the target. 

The Bank of England's main task is to use monetary policy as a tool to keep annual inflation close to a government-set target of 2%, in order to preserve the value of money.

UK annual inflation had stood at a four year-low point of 2.1% in November, the Office for National Statistics confirmed.

The ONS said the largest contributions to the fall in the rate came from prices for food and non-alcoholic beverages and recreational goods and services. These were partially offset by an upward contribution from motor fuels.

This helped to offset a rebound for Britain's housing markets, particularly in London.

The annual CPI rate has held above this target level since November 2009 but has dropped from a level of more than 5% in the space of two years.

The slowdown comes as inflation drops in many advanced economies, including the US and euro zone, a reflection of subdued demand and weak commodity prices worldwide according to analysts.

With inflation low, and British unemployment not yet below 7%, the Bank of England is likely to keep its main interest rate at a record-low level of 0.50% this year.

Britain is a member of the European Union but not of the euro zone so retains responsibility for its monetary policy, and although the Bank of England has a high degree of independence it answers in the last resort to the government.