On Tuesday the pound sterling declined against the greenback, reaching 18-month
lows after data showing the annual rate of inflation in the U.K. slowed
to the lowest in 14 years last month.
GBP/USD was down 0.56% to 1.5083 from 1.5151 ahead of the data, not far from last week’s 18-month trough of 1.5033. Sterling was also lower against the euro, with EUR/GBP up 0.22% to 0.7816.
The annual rate of consumer inflation slowed to 0.5% last month the Office of National Statistics said, down from 1.0% in November. It was the lowest rate of inflation since May 2000. Economists had expected a smaller decline to 0.7%.
Compared to expectations for a reading of 0.1% after falling 0.3% in November, consumer prices were unchanged month-on-month.
The ONS said inflation was unchanged last month in large part due to “falling price movements for gas and electricity”. Moreover, transport costs fell by 0.2% from a month earlier, due to falling petrol and diesel prices.
The pound moved lower due to the slowdown in inflation as it underlined expectations that the Bank of England will keep interest rates on hold at record lows for most of this year.
Core inflation, which strips out more volatile food and energy costs rose 1.3% last month, up from 1.2% in November, but below forecasts for a reading of 1.4%.
The retail price index increased 1.6% in December.
The data also showed that the house price index climbed 10.0% in November, below expectations for a gain of 11.1% and down from 10.4% in October.
