"Inflation is likely to remain subdued in the short-term due the effects of continued lockdown measures to stem the spread of Covid-19."
On a monthly basis, CPI grew by 0.3% in December, following a 0.1% fall in November.
CPIH inflation, which includes owner occupiers’ housing costs, rose to 0.8% in December, up from 0.6% in November.
The largest contribution to the CPIH 12-month inflation rate came from recreation and culture, partially offset by a downward contribution from falling food and non-alcoholic beverage prices.
On a monthly basis, the CPIH grew by 0.2% in December, following a 0.1% fall in November.
Janine Boshoff, NIESR economist, said: "Headline inflation increased to 0.6% in December, up from the 0.3% recorded in November. Our measure of underlying inflation, which excludes extreme price movements, remained unchanged at 0.3% in December.
"Our analysis at regional level indicates that regions that entered higher tiers of restrictions in December experienced marked decreases in consumer prices during the month. Inflation is likely to remain subdued in the short-term due the effects of continued lockdown measures to stem the spread of Covid-19.”
Robert Alster, CIO at Close Brothers Asset Management, commented: “The rate of inflation doubled in December, but ongoing lockdowns and consumer uncertainty, accompanied by falling global oil prices, meant it remained far below the Bank of England’s 2 percent target.
“With Government debt soaring and individual purse strings tightening, Britain is extremely vulnerable to a rise in inflation in the year ahead. Short-term fluctuations caused by Brexit disruption and exchange rate shifts may not yet concern the Bank, but all eyes will be on when and how wages recover from Covid. On the other hand, should inflation weaken further, action may need to be taken to stimulate spending and boost the economy; it’s worth remembering that negative interest rates have not been taken off the table as a possible policy tool.”
