UK inflation slowed down in December, in line with expectations. The Office for National Statistics released data on Tuesday showing the Consumer Price Index (CPI) fell in line with expectations to 4.2 from a prior 4.8 on a year on year basis. The main cause of the decline was due to lower fuel prices and a big drop in the cost of clothing. Biggest one-month drop in CPI annual rate since April 2009, and the lowest rate since June 2011
Month over month, CPI grew 0.4 in December as forecast, higher than November’s 0.2 increase.
The data adds support to the Bank of England’s target inflation should eventually drop below its 2 percent target by the end of the year.
A further drop in inflation is expected in coming months, reducing the squeeze on incomes seen last year and therefore providing a much needed boost to economic growth in 2012. There will be less concern the economy may be heading in a recession.
GBPUSD jumped from 1.5354 to 1.5372 within minutes of the news at 09:30 GMT.