Roudup: British CPI down to almost 15-year low

Britain's consumer prices index (CPI) fell to 0.5 percent in the year to December 2014, marking an almost 15-year low, data from the Office for National Statistics (ONS) showed Tuesday.

The inflation rate down from 1.0 percent in November, falling to the lowest since May 2000.

The main contributions to the fall came from the December 2013 gas and electricity price rises falling out of the calculation and the continuing drop in motor fuel prices, said ONS.

CPIH, an inflation gauge include consumer prices and owner occupier's housing costs, increased 0.6 percent in the year to December 2014, down from 1.0 percent a month previous, data also showed.

When inflation rate fell below 1 percent, Bank of England governor have to write a letter of explanation to the Chancellor.

Martin Beck, senior economic advisor to the EY ITEM Club, expected the governor to say that the very low rates of inflation would be temporary and would help to boost growth, so there was no question of further stimulus being required.

"We would be surprised if the MPC will want to raise rates while inflation is very low. With inflation set to be below 1 percent for almost the whole of 2015, we do not expect the first rise to come before early 2016," said Beck.

Inflation took another big step down in December and the halving in the oil price since the summer should mean that Britain comes within a whisker of deflation soon, said Paul Hollingsworth, Britain Economist at Capital Economics.

However, Hollingsworth believed Bank of England would focus on the medium-term outlook for inflation. "Its present weakness may not prevent it from raising interest rates later this year," said Hollingsworth. Endit