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Timing of interest rate rise pushed further back

17 Dec 2014

Date released from the Office of National Statistics (ONS) show that the UK inflation rate was 1% in the year to November, down from 1.3% in the year to October

Tha last time inflation was this low was September 2002

The fall was mostly caused by a reduction in food and transport costs (fuel, due to the falling oil price) and alcohol and recreational and cultural goods - these factors contributed to a 0.4% fall in the headline figure

UK government 30 year bond yields were pushed to their lowest ever level - below 2.5% - which interest and mortgage rates are highly correlated to

As the Bank of England's inflation target is 2.0%, interest rates are unlikely to rise until late next year - rate changes are the main (but not only) instrument used to control inflation, so will not rise until inflation either starts rising too quickly, or expectations of future inflation rise significantly. A spike in wage inflation would be the usual trigger for this, but at the moment wage growth is relatively benign

For the full ONS release see here

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