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Inflation tumbled to lowest level for three years in December | Business News

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The rate of inflation has fallen to its weakest level in three years, bolstering the case for the Bank of England to take action to support economic growth.

The Office for National Statistics (ONS) reported that the core CPI measure eased from 1.5% in November to an annual rate of 1.3%.

Economists had predicted a flat picture for consumer prices. The ONS said the main downwards pressure came from hotel room costs and heavy discounting on women’s clothing in the run-up to Christmas.

The slowing of price growth in the economy, while welcome for households, indicates that demand remains below potential.

It is now known that five members of the Bank of England’s nine-member rate-setting committee share worries that more stimulus is needed amid a lack of clear evidence of a bounce for the economy predicted after the Conservatives’ election win.

:: Carney signals ‘prompt’ rate cut ahead unless economy picks up

One of those monetary policy committee members, Michael Saunders, has already voted for a rate cut and used remarks on Wednesday to argue that even with an improvement in growth, the economy would remain sluggish.

Ahead of the Bank’s next rate-setting meeting at the end of the month, he described evidence of a ‘Boris bounce’ as “pretty limited.”

The pound, which has felt pain this week on surging rate cut expectations, was almost half a cent down against the dollar on the day at $1.2988 after the ONS data dropped.

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