Editor's Take | CPI inflation eases to 2.05%

"Unlike when the cap is lowered, energy firms don't have to automatically raise prices when the cap is lifted".

'That said, sadly it is still the case that many savings accounts are paying less than inflation - particularly older accounts and those held with the high street banks.

The Office for National Statistics (ONS) said the fall was led by a downward trend in prices of electricity, gas and other fuels.

Thirteen out of the 23 industry groups in the manufacturing sector showed positive growth in December compared to the same month the previous year.

Sterling held firm after the news, at 1.289 United States dollars and 1.138 euros.

It's good news for savers who have suffered in recent years with rates that don't keep up with inflation.

"House prices continued to grow, albeit at the lowest United Kingdom annual rate since July 2013, with growth in the North East and London lagging behind Northern Ireland, Wales and the West Midlands".

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The biggest ever monthly fall in gas prices since comparable records began in 1988 coincided with the start of energy regulator Ofgem's cap on household bills. Diesel also fell by 2.4p to 129.5p. "As a result, we continue to think the Bank of England would press ahead with interest rate hikes if a Brexit deal is reached despite today's slip in inflation below target", says Andrew Wishart, an economist at Capital Economics.

"This is helpful news from an economy now being buffeted by heightened Brexit uncertainties".

"Assuming some kind of smooth Brexit, it should be able to gently nudge rates up over the next couple of years".

However, he added: "If there is a no-deal United Kingdom exit from the European Union at the end of March, the inflation outlook will be clouded by a number of factors - most notably what happens to sterling, how well the economy holds up and what tariffs come into effect".

Mr Brettell added that now the "inflation genie is still firmly in the bottle, despite unemployment at multi-decade lows", which has made the Bank's job easier over the past few years.

The Retail Prices Index (RPI), a separate measure of inflation, was 2.5%, down from 2.7% in December.

Manufacturers' raw materials costs were 2.9 percent higher than in January 2018, the slowest increase since June 2016, the month of the Brexit referendum.

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