LONDON: The UK inflation rate fell to 0.5% in December that is lowest on record, official figures show.
Inflation as measured by the Consumer Prices Index fell from 1% in November to its lowest rate since May 2000, helped by cheaper fuel prices.
Low inflation could mean lower interest rates for longer, Bank of England governor Mark Carney told the BBC.
However, he said he still expected rates to “move up over the course of the next couple of years”.
A fall of inflation below 1% triggers a letter of explanation from Mr Carney to the chancellor.
This is because the CPI rate is more than one percentage point away from the Bank’s 2% target.
The Office for National Statistics (ONS) also said that the Retail Prices Index (RPI) measure of inflation fell to 1.6% from 2%.
The ONS said that in addition to falling fuel prices, the drop in inflation was also due to the rises in gas and electricity prices in December 2013 falling out of the equation.
Economists said that a further fall seems likely, bringing the UK closer to the scenario playing out in the eurozone, where deflation has become a problem for policymakers.
Paul Hollingsworth, of Capital Economics, said inflation could fall to about 0.2% in February, and that an outright drop in prices was possible.
Martin Beck, senior economic advisor to the EY Item Club, said a negative reading in February “is now looking more likely than not” as the impact of further oil price falls had yet to feed through.
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