Inflation turns positive in November

The core consumer price index, which excludes food and energy, rose 0.2% month-on-month, the same pace of growth as in October and September.

Last month, energy prices fell 1.3 percent, dragged down by gasoline prices, while food prices decreased by 0.10 percent.

According to Pantheon Macroecomics, oil prices fell by 1.5 per cent last month, compared to 2.3 per cent a year earlier.

The energy index fell 1.3 percent after increasing by 0.3 percent in October.

It targets 2% inflation but uses the price index for personal consumption expenditures, or PCE index, which is running below the core CPI.

Fed policymakers begin a two-day meeting on Tuesday to consider hiking the federal funds rate, which has been near zero since December 2008 in an attempt to boost economic growth.

Howard Archer, chief United Kingdom and European economist at IHS Global Insight, said: “The Bank of England will be relieved to see United Kingdom inflation returning to positive territory in November, although most monetary policy committee (MPC) members will want to see core inflation firm more before considering any interest rate hike”. Whereas, the fall in energy prices by 14.7% over the past year contributed toward keeping inflation low.

Food prices declined 0.1 percent, the first monthly decline since March.

Hargreaves Lansdown senior economist Ben Brettell said the fact the 12-month CPI had edged back into the black last month made little difference to the overall picture.

The research body said that November’s consumer prices figures “look set to show that the UK’s spell of negative inflation has ended”.

Costlier food prices especially onion and pulses also had an impact on the wholesale price index (WPI), which moved up to (-) 1.99 per cent in November from (-) 3.81 per cent in the previous month.

The biggest drivers have been higher costs for medical care and shelter, such as rent or the cost of buying a home. Core good inflation dropped by 0.2% m/m and 0.6% y/y was offset by rise in core service inflation of 0.3% m/m and 2.9% y/y.

Last week, a number of supermarkets cut petrol prices to below £1 a litre, the lowest since 2009.

Airline fares shot up 1.2% and tobacco prices rose 0.5%.

There is optimism that tightening labor market conditions, characterized by a jobless rate now in a range that some Fed officials view as consistent with full employment, and strong domestic demand will put upward pressure on wages and drive inflation toward its target.