LONDON (Reuters) - British inflation edged down in November to its lowest level in four years, giving the Bank of England plenty of breathing space to keep interest rates at a record low even as the economy picks up speed.
Consumer prices rose 2.1 percent on the year in November, the slowest increase since November 2009, as the impact of higher gas and electricity prices had yet to be felt, the Office for national Statistics said.
Economists taking part in a Reuters poll had expected inflation to stay at 2.2 percent, its rate in October.
Compared with the previous month, the consumer price index in November was up 0.1 percent, the ONS said.
Separately, house prices in Britain rose at their fastest pace in October in just over three years.
Annual inflation has exceeded the Bank of England’s 2 percent target every month since December 2009, steadily eating into the pay of British workers and making living standards a big political issue ahead of the 2015 elections.
Despite above-target inflation, the BoE’s focus remains on nurturing an economy which is growing more quickly than most other industrialized countries but remains smaller than before the financial crisis.
The BoE has said it will only think about raising record-low interest rates once unemployment falls to 7 percent, unless inflation expectations threaten to get out of control.
Figures due on Wednesday are expected to show unemployment stayed at 7.6 percent in the three months to October.
The ONS said on Tuesday that the slowdown in November’s inflation figure was partly due to fruit and vegetable prices as well as the later introduction this year of hikes in power tariffs.
An ONS official said last year’s increases in utility prices affected inflation in November but were only expected to impact the CPI in December this year.
An underlying measure of inflation, which strips out increases in energy, food, alcohol and tobacco, rose by 1.8 percent in November compared with the same month last year.
Data also released by the ONS on Tuesday showed that factory gate prices rose by 0.8 percent in annual terms, slower than economists’ predictions of a 0.9 percent increase.
Some economists expect inflation pressure to grow in the coming months when the impact of the recently announced prices rises for household heating will be felt.
House prices across Britain rose by 5.5 percent in the 12 months to October, the fastest increase since September 2010, the ONS also said on Tuesday.
Increases were concentrated in London, where prices were 12 percent higher than a year earlier, the highest increase since August 2010. Excluding the capital and the south east of England, prices in Britain were 3.1 percent higher.
The Bank of England last month said it would end one of Britain’s programmes aimed at stimulating mortgage lending and keep a close eye on the housing market amid fears of a bubble.
The ONS measure of house prices in the 12 months to October compared with increases of 6.5 and 7.7 percent reported for November by lenders Nationwide and Halifax.
Reporting by William Schomberg and Pete Griffiths