UK inflation tumbles to 14-year low of 0.5% - live blog

http://www.theguardian.com/business/live/2015/jan/13/uk-inflation-falls-oil-bank-of-england-live

Version 0 of 1.

5.48pm GMT17:48

European markets in buoyant mood

A strong opening on Wall Street after better than expected results overnight from Alcoa has helped dispel worries about the eurozone crisis, uncertainty over the prospects for the European Central Bank implementing quantitative easing, and the continuing plunge in the oil price. So European markets have made some good gains during the day, despite pressure on energy companies. The final scores showed:

On Wall Street the Dow Jones Industrial Average is currently nearly 120 points or 0.65% higher.

But Brent crude has lost another 3% to $45.9 a barrel. This has had a knock on effect on the Russian currency, with the rouble down 4% to 65.7 roubles to the US dollar.

On that note, it’s time to close up for the evening. Thanks for all your comments, and we’ll be back again tomorrow.

Updated at 5.49pm GMT

5.26pm GMT17:26

Late trading update from Game Digital, and given the market has now closed you know it can’t be good.

The computer game retailer said in a highly competitive Christmas period with increased promotional activity, sales for the 11 weeks to 10 January fell 5.4%.

With lower than expected margins on hardware sales, it said full year earnings would be flat at around £51m. The City had been expecting around £60m.

Game’s shares closed 4p higher at 348p, before the warning, so they may well get hit tomorrow.

Game has just issued a profit warning. EBITDA to be flat at £51.3m v consensus of £63.8m.

Jeez, a profit warning from high-flying Game Digital at 5.09pm...perhaps prompted by the update coming out shortly from US peer GameStop

Updated at 5.30pm GMT

4.27pm GMT16:27

Amid the debate about whether the European Central Bank should unveil quantitative easing - perhaps at next week’s meeting - and if so, how much, come some interesting comments from ECB board member and Bank of Austria president Ewald Nowotny:

NOWOTNY: BETTER FOR ECB TO DECIDE ON QE SOONER NOT LATER; NO ACTION WOULD AMOUNT TO DE FACTO TIGHTENING

#ECB's Nowotny: A central bank should provide clarity about strategy quickly. (MNI)

4.09pm GMT16:09

Interesting situation with oil (briefly):

WTI/BRENT at parity for 1st time s. July '13 showing signs that Saudi's strategy of attempting to curb US #Shale is working ... #OPEC #oil

Parity in WTI & Crude. How many more surprises in oil markets still to come? pic.twitter.com/TWGlXQ5oHt

WTI at parity to Brent captured on my Reuters screen. (It didn't last long) pic.twitter.com/s5OXITIF6w

Updated at 4.10pm GMT

3.56pm GMT15:56

Back to UK inflation and more from Bank of England governor Mark Carney, who tells ITV news that deflation is “possible” and repeats that interest rates are expected to increase over the next few years “to a limited extent and at a gradual pace”.

Here’s a flavour of the interview between Carney and ITV’s Joel Hills:

Q. Will inflation turn negative?

“It’s possible. The MPC provides a forecast, an updated forecast will come out in February and this is a question we’re looking at, and I would rather defer that until that forecast comes out.”

Q. But you have a personal view, what is your view, how likely is it we will see deflation?

“Ok let’s make distinction here. There is a question whether inflation actually turns negative. But the bigger economic question, the more relevant question for British households, is whether we see sustained and widespread falls in prices across a range of categories. We’re not seeing that. The BoE’s job is to make sure we don’t see that and we have the means to ensure that doesn’t happen. Let me be clear Joel, what we are talking about is an economy that is growing solidly, that has created more than half a million jobs over the course of the last year. Wages are starting to increase so the question for monetary policy, is the pace of interest rate increases. You can expect and your viewers should expect that over the next few years, increase rates are going to increase to limited extent and at gradual pace and maybe a little more limited and a little more gradual than we would have thought a year ago, given major developments abroad.”

Q. Deflation?

“It’s possible prices will fall in a given month, on a year-on-year basis. That’s possible. But broad based price falls across a broad range of goods and service, a change in people’s expectations, no. Because the Bank of England has the means, we have the will and we have our responsibility and we will take our responsibility to provide the necessary stimulus again to be absolutely clear, the path of policy though in order to achieve our target is likely to be one of limited and gradual interest rate increases.”

Q. Does inflation this low mean interest rate rises are a long time off?

“Listen to what I said. You can expect over the course of the next couple of years, your viewers should expect gradual and limited interest rate increases.”

Q. The market is betting on an interest rate hike next summer. Does that sound sensible?

“I’m not going to put a precise timeline on it, I don’t have to.”

3.37pm GMT15:37

Over in Europe, and the European Commission seems to be allowing eurozone states some limited flexibility in meeting the agreed fiscal rules, a move which might benefit Italy but possibly not Spain. News service MNI reported:

In new guidance on how to interpret the Stability and Growth Pact adopted at a meeting in Strasbourg, the commission said it would allow countries in the preventative arm of the pact — those with a budget deficit of 3% or less of GDP and considered to have a reducing debt trajectory — to deduct certain investment-related expenditures from their overall budget deficit.

The recommendation said that a country’s budget deficit should now also take into account any positive fiscal impact from the implementation of structural reforms as long as they are major, are actually implemented and raise the country’s growth potential.

The new rules will be effective immediately.

Importantly, the revised rules will now allow Italy to take advantage of the so-called investment clause found within the Stability and Growth Pact despite its hefty debt burden. Until now, Rome had been prevented from using the clause as it was failing to bring its debt ratio steadily down to 60% of GDP. This stipulation has been lifted from the rules.

The investment clause allows countries to deviate from their medium-term budget objective to accommodate higher levels of investment during times of economic hardship.

Still, the investment clause can only be implemented if a country’s GDP is negative or if its output gap — the difference between actual and potential output — is greater than -1.5% of GDP and the deviation does not lead to a breach of the 3% deficit rule. This rules out countries such as France and Spain.

Updated at 5.08pm GMT

3.28pm GMT15:28

More on inflation, and Philip Shaw at Investec still expects the Bank of England to raise rates in August, despite the prospect of further falls. He said:

The continued slide in global oil prices has resulted in some of the major supermarkets announcing further reductions in petrol prices overnight, while one of the ‘big 6’ energy suppliers (E.On) announced a 3.5% cut in its domestic gas tariffs earlier today, and it would not be a surprise if its competitors follow. Hence it looks very much as if energy costs will continue to lead inflation down further over the coming months, and we now take the view that CPI inflation will enter negative territory, albeit for a couple of months during the spring. This could be more prolonged in the event of continued downward pressures on crude oil costs for a few more months.

We would hesitate to term this a period of deflation, as we consider deflation to be a sustained period of widespread falling prices, and not a few months where energy costs drop sharply. Note from today’s data that despite the sharp downward trajectory of the headline rate of inflation, the ‘core’ measure (i.e. CPI ex-food, energy, tobacco and alcoholic beverages) actually ticked up a touch to 1.3% from 1.2%.

Our central call remains that the Monetary Policy Committee will raise rates in August this year... The key of course is the extent to which the MPC is confident that inflation is heading back to the 2% target over the medium-term. In this respect we would suggest that downward pressure on inflation from energy costs will be relatively short-lived, that sterling has fallen by 2% in trade weighted terms over the past six months and that pay growth seems to be strengthening. A prolonged period of ‘lowflation’ does not appear to be on the cards in the UK.

We also note that the MPC expanded its QE programme at a couple of stages in late 2011/early 2012 when Lord King was writing open letters to explain inflation overshoots. If the MPC was ‘looking through’ what it believed to be short-term periods of higher inflation, it may well decide to do the same when inflation is very low, providing it believes that the recovery is on solid ground. Indeed this seems to be its current collective view. In this regard, tomorrow’s testimony by Mark Carney to the Treasury Committee may provide an update to the MPC’s thinking, even though the Governor will be wearing his macroprudential rather than his monetary policy hat.

2.42pm GMT14:42

Stock market traders are in optimistic mood today, it appears.

The Dow Jones industrial average just jumped by over 200 points, or 1.25%, at the start of trading in New York.

ALERT: Dow pops 220+ points after the opening bell » http://t.co/tjYYrpCp46 pic.twitter.com/GClHxGH705

The main European markets are all up too, with the FTSE 100 gaining 47 points to 6548.

Fears over slow global growth are being shrugged off. And while shares in oil producers are down (again), airline and utility stocks are up.

2.33pm GMT14:33

UK inflation, some highlights

Today’s inflation report contains some interesting detail on how the cost of living has changed over the last year.

Food prices, for example, were 1.9% lower in December 2014 than December 2013. Within that, vegetable prices are down 7%, while bread and cereals are 2.5% cheaper.

Alcoholic beverages are up 1.3% over the year, driven by a 3.5% rise in wine prices (spirits and beer prices both fell 0.5%).

Tobacco is up 7%.

“Electricity, gas and other fuels” are 2.1% cheaper year-on-year, led by a 22% tumble in “liquid fuels” (ie oil).

When it comes to vehicles, new cars cost 1.3% more, but second hand ones are 3.3% cheaper.

Prices of games and toys were flat over the year, while books cost 10% more.

You can see all the details here, starting on page 21.

2.01pm GMT14:01

Speaking to ITV, the Bank of England governor is painting a vision of low, steady inflation, just around the corner (or possibly the one after that)

"Over the course of next couple of years...your viewers should expect gradual and limited interest rate increases" - Mark Carney @itvnews

"The sweet spot you want is low, stable predictable inflation. You're going to get that". Mark Carney tells @itvnews

1.56pm GMT13:56

While cheaper oil is good news for UK consumers, it’s a blow to Russia. The rouble has fallen by another 5% today, to 66.4 roubles to the US dollar.

Hasn't been getting that much attention, but the Ruble's been taking another beating lately. (6-month chart) pic.twitter.com/fiUEEbqFb7

1.39pm GMT13:39

Some oil traders are betting that a barrel of crude will fall to just $20 per barrel. And if they’re right, inflation in the UK and beyond is going to keep falling....

fastFT has the details:

A few months ago such as scenario would have appeared apocalyptic – even at the peak of the financial crisis spot prices never went below $30 – but the crash has led some investors to buy options on prices falling even further.

The number of contracts that give the right to sell the US crude benchmark at $20 a barrel by June – known as put options - has swelled from almost nothing at the start of the year to 13,129 lots, according to Nymex data, the equivalent of 13m barrels of oil.

These options currently cost just 7 cents, so they are heavily “out-of-the-money” in financial parlance. But even if West Texas Intermediate oil doesn’t fall to the $20 strike price, these options can increase exponentially in value if oil starts dipping closer to this level.

More here: Traders betting on oil falling to $20 a barrel

NYMEX, or US crude oil, has fallen by another $1.25 per barrel today to $44.82, a new near six-year low.....

1.01pm GMT13:01

Bad news from Sainsbury’s -- the supermarket chain is cutting 500 head office staff, as part of its cost-cutting programme.

Sainsbury's to cut 500 head office roles as part of plan to save £500m... consultation has begun with staff

12.44pm GMT12:44

Mark Carney has also been interviewed by ITV, where argued that the Bank of England has the tools to avoid deflation:

Deflation in UK "possible" but a risk that can be managed. Mark Carney tells @itvnews economy in a "sweet spot". Join @ITVRichard at 13:30

12.22pm GMT12:22

Mark Carney: Interest rates may stay lower longer

BBC News just broadcast their interview with Mark Carney.

Carney explained that a little bit of inflation is good for the economy, and predicted that inflation will probably fall further in the months ahead (given recent oil price declines).

So has the balance of risks shifted towards deflation?

Carney says the Bank still expects to normalise monetary policy over time. But interest rate rises may be “a little more gradual and a little more limited” than previously thought.

Reuters has snapped the key points.

Updated at 12.26pm GMT

12.07pm GMT12:07

UK #inflation joint lowest level ever pic.twitter.com/hd0Yfgmlet

12.01pm GMT12:01

UK inflation: a recap

A quick summary, for readers just joining us.

The government has hailed the news that Britain’s inflation rate has fallen to its joint-lowest level on record, dragged down by falling energy and food prices.

The consumer prices index rose by just 0.5% annually in December, tumbling from 1.0% in November.

The Office for National Statistics reported that food prices fell by 1.9% during 2014, while prices of motor fuels tumbled by 10.5%, dragging down the cost of living.

Large hikes in energy bills in 2013 were also not repeated, meaning household service costs rose at a lower rate.

Chancellor George Osborne declared:

“Today we have welcome news that inflation is at its lowest level in modern times.

We have family budgets going further and the economic recovery starting to be widely felt. We will always remain vigilant that we have lower inflation for the right reasons. And today is yet further proof our long term plan is working.”

The fall in #inflation is good news for families. Our long term economic plan is on track and helping hardworking taxpayers.

Lower inflation should give consumers a boost, as the plunge in crude oil prices feed through to households and businesses.

Several economists have predicted that the slowdown in the cost of living should give the economy a boost.

But TUC chief Frances O’Grady warned that workers’ incomes have been eroded by years of falling real wages, leaving them vulnerable to further government cutbacks.

Here’s Angela Monaghan’s news story:

UK inflation falls to 0.5% - the lowest ever recorded

The oil price has continued to fall today, hitting a near six-year low. That suggests inflation could be pushed even lower in January.

Economics editor Larry Elliott argues that we shouldn’t worry about full-blown deflation, though:

Deflation becomes a problem when consumers and businesses think it is going to last. In those circumstances, they put off spending or investment decisions because they anticipate that prices will be lower in the future than they are today. In those circumstances, economic activity dries up.

The UK is not yet in that situation.

Here’s Larry’s full analysis;

Inflation is low and heading lower - but don’t bank on deflation

The Bank of England governor will write to chancellor Osborne to explain why inflation is so far from the 2% target. Mark Carney has already told the BBC that it means interest rates could stay lower for longer.....

Updated at 12.02pm GMT

11.47am GMT11:47

Mark Carney is giving interviews to the BBC and ITV on today’s inflation report, and the Beeb’s Robert Peston is helpfully tweeting the key points:

Just interviewed Bank of Eng gov. Says although inflation lower than Bank expected in Nov, no need for more money stimulus

Though Mark Carney gave a hint (no more than that) interest rates could be lower for longer - though path still gently upward

11.22am GMT11:22

Dear George....Carney writes to the chancellor

The Bank of England has confirmed that governor Mark Carney is writing to George Osborne, explaining why inflation has lurched below the 2% target.

However, we won’t get to read the letter until 11th

18th

February, when it is released alongside the Bank’s next quarterly inflation report.

This has given journalists the opportunity to imagine what Carney might say; ITV’s Richard Edgar reckons the governor will predict that energy bills and food prices could keep falling. And with an election looming, the chancellor shouldn’t grumble:

"Dear George ..." That letter in full: http://t.co/A2VVp5kmIX

Updated at 11.25am GMT

11.05am GMT11:05

Here’s a worrying thought: Britain’s tumbling inflation rate is going to make it harder for workers to demand decent pay rises.

And if wages don’t pick up, then government’s income tax take will remain disappointing (this is one reason the deficit has remained stubbornly high).

As analyst Louise Cooper puts it:

Lower CPI is a mixed blessing. For the government lower inflation increases the debt burden. It also threatens the income tax take from little wage growth.

According to Labour , the Treasury has lost £95bn in this parliament from lower income tax as wages have not kept pace with inflation. Labour estimate that it could be another £100bn in the next parliament. It is difficult for employees to argue for wage rises when headline CPI is only 0.5%.

10.56am GMT10:56

BCC: Deflation concerns are 'grossly exaggerated'

Don’t worry about Britain falling into negative inflation, urges David Kern, chief economist at the British Chambers of Commerce.

While Kern predicts that CPI inflation will remain below 1% all this year, he doesn’t want people to fret about a widespread drop in prices:

“Concerns over deflation pressures are grossly exaggerated and risk undermining business confidence. And these figures show that inflation in the services sector - which accounts for some 80% of the UK economy - remains persistently above 2%.

“The main factor which counts for the low level of goods inflation, the fall in energy and goods prices, is positive as it boosts consumers’ disposable income and makes it easier for businesses to devote resources to investment.

The BCC also reckons interest rates could be left untouched until 2016....

10.51am GMT10:51

TUC General Secretary Frances O’Grady has cautioned that today’s inflation report shows the fragility of the global economy.

She also cautions against assuming that Britons can now support further government cutbacks:

“While low inflation means we are finally seeing real wages start to rise, it will be many years before they are restored even to their pre-crisis levels. Seven years of falling real wages have undermined incomes and spending power; and the threat of slipping into deflation is very real. It’s a very dangerous time for the Chancellor to be proposing a new round of austerity, which could plunge the economy back into recession.

“We need a strong and sustainable wages recovery, built not just on falling inflation, but on higher pay settlements and more decent, full-time jobs.”

10.43am GMT10:43

The Institute of Directors is also in the “good news” camp.

They even argue that the Bank of England should start raising interests regardless, to prevent reckless borrowing today.

James Sproule, IoD chief economist, says:

“Cheap money and high consumer confidence may provide a short term boost to the economy, but the longer the base rate remains at its extraordinary low level of 0.5%, the greater the risk of businesses and consumers assuming this is the new normal and adopting unsustainable plans that rely on these low rates continuing.”

10.39am GMT10:39

Rob Wood, economist at German bank Berenberg, says today’s inflation report is “very good news indeed”:

Low inflation driven by cheaper petrol, food and import costs is unambiguously positive for the UK.

It represents a big tax cut for consumers, who will be seeing real average earnings growth in excess of 1.5% yoy within a couple of months. Just the direct effects of lower petrol prices will put upwards of an extra £8bn a year in consumers pockets, and potentially much more if utility bills and other prices (air fares, catering etc) respond to cheaper oil and commodity prices.

10.35am GMT10:35

The Retail Prices index, a wider measure of inflation which includes housing costs, also fell in December.

RPI dropped to 1.6%, from 2.0%, which is the lowest since 2009.

10.31am GMT10:31

Guy Ellison, Head of UK equities at Investec Wealth & Investment, says weaker oil price will probably keep pushing UK inflation down:

Indeed, with the ongoing fall in the oil price there is a chance that headline CPI approaches 0% in the coming months.”

10.28am GMT10:28

Jeremy Cook, economist at World First, points out that core inflation (which strips out changes in energy and fuel prices), was rather higher than the headline CPI:

“All in all, there are bright spots here. Core inflation remains at 1.3%, which shows that despite the moves in food and energy prices, the fundamental levels of prices here in the UK are not in danger of deflation yet.

It is now very much up to wages to stimulate inflation through 2015; something we see happening after the election.”

10.25am GMT10:25

Expert reaction starts here

Could UK inflation turn negative, as in Europe?

Nick Beecroft, Senior Market Analyst at Saxo Bank, reckons it’s possible:

“December UK CPI fell to 0.5% yoy, much more than expected, and compounding expectations for an imminent drop into negative territory.

US CPI figures will be released this Friday, and I also expect them to surprise to the downside. Rate rises in the UK and the US should not now be expected in 2015.

Updated at 10.25am GMT

10.23am GMT10:23

Here’s confirmation that UK earnings are finally outpacing inflation after years of shrinking real wage packets.

If wage growth was unchanged through to Dec, UK real wage growth will have enjoyed its best 3 months since early '08. pic.twitter.com/7NCB9K9eDK

Updated at 10.24am GMT

10.19am GMT10:19

The Liberal Democrat’s Danny Alexander, the chief secretary to the Treasury, says the tumble in the oil price is acting “like a giant tax cut for the economy, putting more money in the pockets of hard pressed consumers”.

10.17am GMT10:17

Economists are scrambling to point out that an inflation rate of 0.5% is not really a course for celebration:

@DuncanWeldon indeed, truly good news would be 2% CPI inflation rate with 4.5% nominal pay growth. Beware today's spin

Can everyone stop celebrating the descent of the developed world into deflation?

10.13am GMT10:13

The pound dropped against the US dollar when the inflation data was released.

It’s now down 0.75 of a cent to $1.5094, as traders conclude UK interest rates will remain at their record low of 0.5% for some time.

10.08am GMT10:08

George Osborne just appeared on Sky News.

He insisted that the fall in inflation is good news, pledging to stay vigilant to make sure it’s for the ‘right reasons’ .

But he declined to say whether he might cut fuel duty in March’s budget, to give motorists a further hand.

“We’ve frozen duty so people can benefit from lower energy costs at the pumps,” the chancellor said.

9.58am GMT09:58

Osborne welcomes fall in inflation

The chancellor, George Osborne, claims that the tumble in inflation is proof that his beloved “long term economic plan” is working.

Inflation is 0.5%- lowest level in modern times.Welcome news with family budgets going further& economic recovery starting to be widely felt

We will always remain vigilant that we have lower inflation for right reasons & today is yet further proof #LongTermEconomicPlan is working

There’s more than a dollop of spin here. For starters, tumbling oil prices and a supermarket price war were NOT part of the Plan. Secondly, much of the developed world is seeing weaker inflation - the eurozone’s inflation rate is now negative.

Thirdly, the official target is 2%; seen as a level consistent with stable prices, solid economic growth and a healthy balance between creditors and debtors.

9.52am GMT09:52

An inflation rate of just 0.5% has two immediate impacts on households and businesses.

1) It means earnings are rising faster than prices, so real wages are growing

2) It means there’s less chance of the Bank of England raising interest rates this year.

Updated at 10.02am GMT

9.46am GMT09:46

Chart: Food and transport costs drag inflation down

Supermarket price wars have also helped to send inflation plummeting to its lowest since May 2000.

In the year to December 2014, food prices fell by 1.9% and prices of motor fuels fell by 10.5%, the ONS reports.

9.42am GMT09:42

ONS: Falling energy prices dragged inflation down

There was no monthly inflation between November and December, helping to drag the annual inflation rate down to 0.5%.

The ONS says that housing & household services costs were unchanged month-on-month, mainly due to “falling price movements for gas and electricity”.

And transport costs fell by 0.2% between November and December 2014, due to falling petrol and diesel prices.

The average price per litre has fallen to 116.8p for petrol and 122.9p for diesel. This is 24.8p per litre below the peak average prices of 141.6p and 147.7p per litre for petrol and diesel respectively in April 2012.

9.41am GMT09:41

9.34am GMT09:34

Inflation was dragged down in December by falling motor fuel, electricity and gas prices, says the Office for National Statistics. That’s the tumbling oil price feeding through to consumers.

9.32am GMT09:32

UK INFLATION FALLS TO 0.5%

Here we go. UK inflation has tumbled to just 0.5% in December!. That’s the weakest reading since 2000, I think, and even weaker than expected.

It’s a “huge, huge” reading, says Bloomberg. More to follow.....

Updated at 9.33am GMT

9.27am GMT09:27

The pound has weakened this morning ahead of the inflation data, as traders anticipate a weak reading.

Sterling is down half a cent against the US dollar at $1.5117.

9.08am GMT09:08

Every City economist polled by Reuters believes that UK inflation hit a new 12-year low below 1% last month.

All 43 forecasters expect UK Dec inflation to fall below 1%. Consensus 0.7%, range 0.5-0.9% @ReutersPolls pic.twitter.com/7pLGvDCwg5

9.06am GMT09:06

Just 30 minutes to go until we learn whether Britain’s inflation rate has hit a 12-year low.

The City is expecting a chunky fall, to 0.7% from 1% in November, partly due to falling oil prices.

DailyFX currency strategist Ilya Spivak says core inflation, which strips out volatile costs such as energy, could rise from 1.2% to 1.3%.

This suggests that – similarly to the Federal Reserve – the Bank of England may chalk up the slide in headline price growth to the transitory impact of the sinking cost of crude oil, meaning it won’t necessarily interpret a weak result as reason enough to delay interest rate hikes.”

The world gets Japanese forcing Carney to write BoEs 1st open letter explaining why CPI so low http://t.co/MmJB9XbKDm pic.twitter.com/dALrHs0NgW

8.55am GMT08:55

Carney expected to write inflation letter

Mark Carney, governor of the Bank of England, will be forced to write a letter of explanation to the government if, as expected, inflation fell below 1% in December.

The BoE is responsible for keeping inflation at 2%, plus or minus one percentage point. Carney’s predecessor, Mervyn King, wrote several letters explaining why inflation had overshot this target; no-one’s ever had to explain why it has undershot.

Fountain pen sellers in London! Has anybody seen Bank of England Governor Mark Carney recently? #BoE #CPI

Unfortunately, the letter isn’t expected to be published until the middle of February.

8.44am GMT08:44

Over in the eurozone, Italy’s president Georgio Napolitano is on the brink of stepping down. And the chatter in the markets is that European Central Bank chief Mario Draghi – the man who “saved the euro” in 2012 – could possibly replace him.

Looks like Italian president will be resigning tomorrow. How much does Draghi love life in Frankfurt??

Italy could probably benefit from Draghi’s skills. The problem is that his work at the ECB is not yet done.

Other potential candidates include former prime ministers Romano Prodi and Mario Monti.

8.23am GMT08:23

Shares in Debenhams have fallen over 6% after the high street chain reported a 0.8% drop in like-for-like sales over Christmas.

Rival ASOS did better, though -- the e-tailer’s shares have surged by 9% after posting a 15% jump in retail sales over the festive period.

8.17am GMT08:17

Those heartless souls in the City are welcoming the departure of Morrisons CEO Dalton Philips; shares in the supermarket chain are leading the FTSE 100 rises, jumping as much as 6%

Morrisons shares leading FTSE 100 risers with 4% gain after ousting of CEO Dalton Philips http://t.co/FW20v4KnhF

8.08am GMT08:08

Overnight, the British Retail Consortium reported that UK shops have suffered their toughest Christmas since the financial crisis struck.

The value of December sales dropped by 0.4% on a year earlier, the BRC says, as retailers slashed prices in an attempt to drive demand.

That’s likely to show up in today’s inflation figures, in 90 minutes time.

Full story: UK retailers have worst December since 2008 as discounts affect takings

8.00am GMT08:00

UK historian Glen O’Hara tweets:

The oil price fall is just becoming a rout. It's extraordinary - one of the most powerful changes in politics and economics for many years.

7.57am GMT07:57

E.ON has become the first UK utility major firm to pass the cheaper wholesale pricers onto customers.

The German firm is cutting gas prices by 3.5 % - which will apparently cut £24 off the average annual gas bill.

Better late than never? Stephen Murray, energy expert at MoneySuperMarket, argues it’s not really enough.

“Whilst this announcement is welcome, it is underwhelming in the face of wholesale prices falling around 20 per cent over the past year. Anyone still languishing on standard tariffs should take action, as bigger savings are easily available.

7.50am GMT07:50

Brent oil at $45.45. Down another 4%.

7.44am GMT07:44

Morrisons CEO planning a large beer after being sacked

Morrisons CEO Dalton Philips is putting on a brave face this morning after learning that his time at the supermarket chain is over.

Philips has told reporters that he will be heading for a ‘very large beer tonight’, after his board ousted him, concluding it’s time for a new chief executive.

It appears that Morrison’s new chairman, Andrew Higginson, dropped the axe on Philips after the company racked up the worst performance of any major UK grocer.

Morrisons needs to return to growth, Higginson says.

Curiously awkward Morrisons conference call, featuring the new chairman and the chief exec he's just fired.

Dalton Philips: "I don't have another job to go to. My wife has given me a long list of chores to do/" #Morrisons

Morrisons is also planning to shut 10 loss-making store (statement here), after like-for-like sales declined by 3.1% over Christmas.

7.32am GMT07:32

Oil price keeps falling

The oil price has hit its lowest level in almost six years this morning, suggesting that inflation will continue to fall in 2015.

The cost of a barrel of Brent crude shed another 3.8% to $45.62, a drop of almost two dollars.

It’s more than halved in the last six months, especially since the OPEC cartel declined to cut production in November:

The latest selloff came as UAE oil minister Suhail bin Mohammed al-Mazroui insisted that OPEC would not cut supplies, arguing that shale oil producers need to cut back instead

US crude oil is also hitting its lowest levels since early 2009:

The Rout continues ... Bloomberg breaking news: WTI Crude Oil Falls Below $45 a Barrel for the First Time Since April 2009

7.21am GMT07:21

The Agenda: UK inflation, Morrisons results, Greek politics

Good morning, and welcome to our rolling coverage of the financial markets, the global economy, the eurozone and business.

Britain’s inflation rate is expected to fall today, bringing relief to households but also fuelling fears that the world economy may be veering into a deflationary spiral.

Inflation, as measured by the Consumer Prices Index, is widely expected to have fallen below 1% in December. Economists predict that it increased by just 0.7%, the lowest since 2002.

That would mean the Bank of England would be failing to achieve its target of a 2% inflation rate (plus or minus one percentage point).

The tumbling cost of crude oil, a supermarket price war, and weak wage growth, are all factors, as prices continue to be pushed down across Europe.

The inflation report is released at 9.30am GMT.

In the City, financial results from supermarket chain Wm Morrison, high street group Debenhams and online fashion retailer ASOS, are being released.

Morrisons has just announced that CEO Dalton Phillips is leaving, and confirmed that sales fell over Christmas. More on that shortly...

Two factors continue to dominate Europe’s financial sector; the Greek election due on 25 January, and the possibility of a European Central Bank stimulus package.

IG’s Stan Shamu explains:

Focus will continue to be on the ECB and any potential easing measures, particularly QE.

It also seems like Greek exit fears are somewhat downgraded and this has seen Greek 10-year yields cool and equities rally. On the calendar today we have Italian industrial production along with UK CPI and PPI. The euro remains relatively sidelined but it won’t take much to ignite some risk appetite, given the amount of headline risk Europe continues to face.

I’ll be tracking all the main events through the day...

Updated at 7.26am GMT