UK inflation drops to 5 year low

UK inflation has fallen to 1.2 per cent, according to official figures.

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By :  ,  Financial Analyst

The UK's rate of inflation has fallen to a five-year low, according to official figures.

A report by the Office for National Statistics (ONS) showed the Consumer Prices Index, the scale measuring inflation, to be at 1.2 per cent for September, down from 1.5 per cent recorded a month earlier. It represented the lowest figure since September 2009 where it reached 1.1 per cent. The Retail Prices Index measure of inflation also fell from 2.4 per cent in August to 2.3 per cent a month later.

The UK's latest inflation figures comes after the Bank of England decided to hold interest rates at the record low of 0.5 per cent. There has been speculation that bank governor Mark Carney was planning to raise interest rates but the news of low inflation may mean the decision, predicted to be imposed later in the year, could be pushed back further.

Great Britain currently boasts the fastest growing economy in the developed world and experts believe that a hike in interest rates could damage this positive trend. The British Chamber of Commerce (BCC) is just one organisation which believes that this latest announcement puts further weight behind the argument to keep interest rates at their current low.

The BCC's chief economist David Kern argued that the Monetary Policy Committee, tasked with setting interest rates, should focus its priorities on boosting business confidence. He explained that increasing interest rates would mean companies are not able to plan and invest properly.

Mr Kern went on to say: "Recent surveys, including our Quarterly Economic Survey, show that the recovery is on track, but is still fragile and faces challenges. Given global economic uncertainties this is clearly not the time to put the recovery at risk with premature interest rate increases.

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