Investing.com - Consumer price inflation in the U.K. slowed to the lowest level since May 2000 in December, fuelling concerns over deflationary pressures, official data showed on Tuesday.
In a report, the U.K. Office for National Statistics said the rate of consumer price inflation decelerated to a seasonally adjusted 0.5% last month from 1.0% in November. Analysts had expected U.K. CPI to decline to 0.7% in December.
Month-over-month, consumer price inflation was flat in December, compared to expectations for a reading of 0.1% and after falling 0.3% in November.
The main contribution to the slowdown in the inflation rate came from prices for gas and electricity. The price of petrol and diesel at the pump continues to fall and this has also contributed to the lower rate of inflation.
Bank of England Governor Mark Carney will now have to write an open letter to the Chancellor of the Exchequer, George Osborn, as inflation is more than a percentage point below the central bank's target of 2.0%.
Core CPI, which excludes food, energy, alcohol, and tobacco costs rose at a seasonally adjusted rate of 1.3% last month, up from 1.2% in November and below forecasts for a reading of 1.4%.
The retail price index increased 1.6% in December, meeting expectations and down from 2.0% in November.
The data also showed that the house prices index climbed 10.0% in November, below expectations for a gain of 11.1% and down from 10.4% in October.
GBP/USD was trading at 1.5099 from around 1.5116 ahead of the release of the data, while EUR/GBP was at 0.7822 from 0.7814 earlier.
Meanwhile, European stock markets remained mildly higher. London’s FTSE 100 tacked on 0.3%, the EURO STOXX 50 picked up 0.1%, France's CAC 40 advanced 0.15%, while Germany's DAX rose 0.15%.