That’s down from 1.2% in October and well below the Bank of England’s 2% target, as the plunging oil price starts to reach petrol pumps. If inflation falls below 1%, Bank governor Mark Carney has to write a letter to Chancellor George Osborne explaining why.
Here it is in context from the Office for National Statistics:
The collapse in oil prices is a big part of this: crude oil is now worth barely more than half of what it was during the summer, bringing inflation down everywhere. The UK is also getting the after-effects of the eurozone’s incredibly low inflation imported over, since the bloc is the UK’s biggest trading partner.
Yields on the UK’s 30-year bonds just dropped to 2.5%, the lowest ever recorded. Low inflation drives yields lower because investors are happy to take a lower return when prices aren’t rising quickly.
Don’t expect a change any time soon. Oxford Economics suggested that consumer price inflation (CPI) would be below 1% for most of 2015 even before today’s figures, largely due to the collapse of oil: