UK inflation nears BoE's 2% target with Nov slowdown

(MENAFN- Khaleej Times) UK inflation unexpectedly slowed in November to the least in four years, moving closer to the Bank of England's two London per cent target. Consumer prices rose 2.1 per cent from a year earlier compared with 2.2 per cent the previous month, the Office for National Statistics said on Tuesday in London. The median forecast of 36 economists in a Bloomberg News survey was for a reading of 2.2 per cent. A separate report showed annual producer-price inflation stayed at the lowest since October 2009. "Today's figures should give reassurance to markets that the period of inflation being way above target is behind us," said Philip Shaw, chief economist at Investec Securities in London. "It makes it slightly easier for the MPC to communicate its policy of keeping rates low. It's not impossible that the two per cent could be hit over the next three-to-four months." Inflation has been above the BoE's goal every month since December 2009. The Monetary Policy Committee said last month that the outlook has improved and it expects price growth to hit the target within the next year. While wage growth remains subdued, there may be some upward pressure on prices in the coming months as electricity and gas price increases come into effect. From the previous month, consumer prices rose 0.1 per cent in November. The decline in the annual inflation rate was partly due to fruit and vegetable prices and base effects from utility-price increases in November 2012. The first of the 2013 energy-price hikes will be captured in the December inflation data, the statistics office said. Core annual inflation, which excludes alcohol, food, tobacco and energy prices, accelerated to 1.8 per cent in November from 1.7 per cent in October, the ONS said. The pound erased an advance against the dollar after the data were released and was little changed at was little changed at $1.6302 at 9:56am London time. The yield on the benchmark 10-year UK government bond was little changed at 2.88 per cent. In another report, the ONS said UK house prices rose an annual 5.5 per cent in October. In London, prices increased 12 per cent, the most since August 2010. Retail-price inflation, a measure used in wage negotiations and as a basis for the inflation-linked bond market, stayed at 2.6 per cent in November, the least since September 2012. Retail prices excluding mortgage-interest payments rose an annual 2.7 per cent. In a sign that some price pressures are easing, separate data on Tuesday showed input prices fell for a fourth month in November, dropping 0.7 per cent from October. Compared with a year earlier, prices fell one per cent, the first annual decline in a year. The biggest downward contribution to both the monthly and year-on-year change came from crude oil. Factory-gate prices declined 0.2 per cent in November from October. Annual producer-price inflation stayed at 0.8 per cent. "Such a profile for input and output prices suggest that underlying inflationary is extremely moderate and the inflation profile is unlikely to change much in the near future," Annalisa Piazza, an economist at Newedge Group in London wrote in a note to clientS