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UK inflation rate falls to 4.1% UK inflation rate falls to 4.1%
(30 minutes later)
The UK inflation rate fell in November to 4.1%, figures have shown, less of a decline than analysts had expected.The UK inflation rate fell in November to 4.1%, figures have shown, less of a decline than analysts had expected.
The Consumer Prices Index (CPI) rate fell from 4.5% in October. Some economists had expected the CPI rate to fall to 3.9% in November.The Consumer Prices Index (CPI) rate fell from 4.5% in October. Some economists had expected the CPI rate to fall to 3.9% in November.
The headline rate of Retail Prices Index (RPI) inflation, which includes housing costs, declined to 3% in November from 4.2% in October.The headline rate of Retail Prices Index (RPI) inflation, which includes housing costs, declined to 3% in November from 4.2% in October.
Inflation is continuing to fall on the back of lower oil and energy costs.Inflation is continuing to fall on the back of lower oil and energy costs.
However, the CPI rate of inflation still remains above the government's target of 2%.However, the CPI rate of inflation still remains above the government's target of 2%.
As inflation is still more than one percentage point above the target, Bank of England governor Mervyn King has had to write another letter of explanation to the chancellor.As inflation is still more than one percentage point above the target, Bank of England governor Mervyn King has had to write another letter of explanation to the chancellor.
Deflation risk?Deflation risk?
Most economists expect inflation to fall still further into the New Year, with some concerned that not only will it go below the government's 2% target, but that deflation could be possible.Most economists expect inflation to fall still further into the New Year, with some concerned that not only will it go below the government's 2% target, but that deflation could be possible.
These figures should not deter the MPC from persevering with interest rate cuts David Kern, British Chambers of Commerce These figures should not deter the MPC from persevering with interest rate cuts David Kern, British Chambers of Commerce class="" href="7733929">personal inflation calculator
This is bad for the economy as it encourages consumers to delay purchases in the expectation that prices will soon be lower, worsening any economic downturn.This is bad for the economy as it encourages consumers to delay purchases in the expectation that prices will soon be lower, worsening any economic downturn.
In his letter to Chancellor Alistair Darling, Mr King said very low inflation was a possibility.In his letter to Chancellor Alistair Darling, Mr King said very low inflation was a possibility.
"Given the short term outlook for inflation, it is quite possible that I will next need to write to you to explain why inflation has deviated by more than one percentage point below the target during 2009," he said."Given the short term outlook for inflation, it is quite possible that I will next need to write to you to explain why inflation has deviated by more than one percentage point below the target during 2009," he said.
Last week, Chancellor Alistair Darling told the Treasury Committee that he did not see deflation as being a significant risk.Last week, Chancellor Alistair Darling told the Treasury Committee that he did not see deflation as being a significant risk.
'Recession worsening'
Despite the continuing fall in inflation, many commentators expect the Bank of England's Monetary Policy Committee to cut interest rates still further from the current level of 2% - a 57-year low.Despite the continuing fall in inflation, many commentators expect the Bank of England's Monetary Policy Committee to cut interest rates still further from the current level of 2% - a 57-year low.
There is relatively little that the MPC can do to prevent inflation moving from above target now to below target during the course of 2009 Mervyn King Read the governor's letter in full
"These figures should not deter the MPC from persevering with interest rate cuts," said David Kern, chief economist at the British Chambers of Commerce."These figures should not deter the MPC from persevering with interest rate cuts," said David Kern, chief economist at the British Chambers of Commerce.
"With the recession worsening, we urge the MPC to cut rates by a full one percentage point in January.""With the recession worsening, we urge the MPC to cut rates by a full one percentage point in January."
The decline in inflation came as the average price of a litre of petrol fell by 9.3 pence between October and November.The decline in inflation came as the average price of a litre of petrol fell by 9.3 pence between October and November.
However, food inflation continued to rise, with the price of fresh fruit and vegetables being more expensive than a year ago.However, food inflation continued to rise, with the price of fresh fruit and vegetables being more expensive than a year ago.