The inflation rate dropped from 0.7 per cent to 0.3 per cent last month, latest figures show.
The drop was much sharper than expected, and could reflect renewed lockdown measures across much of the UK in November as well as the impact of Black Friday sales lengthening this year as retailers tried to make up shortfalls in revenue.
According to the Office for National Statistics, clothing, footwear, food and non-alcoholic drinks reported the sharpest falls, which were offset by price rises in sectors such as games and toys.
At a headline rate of 0.3 per cent on an annual basis, the consumer price index came in well below the 0.6 per cent reading a Reuters poll of economists had forecast.
Premier Miton UK equity manager Jon Hudson says: “November’s restrictions unsurprisingly led to the inflation rate falling and it remains well below the 2 per cent target.
“Looking forward, there are signs of inflationary pressures building, such as rising global commodity prices, but there is currently too much slack in the UK economy for it to become an issue. If a trade deal can be agreed with the EU and the pound rises as a result, it will make importing goods and services into the UK cheaper, further dampening near term prospects of inflation.”
The latest figures will cast further doubt on the effectiveness of the monetary policy used by governments and central banks to try and stimulate inflation.
Quantitative easing and reduced interest rates have not been enough to drive inflation high enough to reach the 2 per cent target.
EQi director Richard Pearson says: “Savers might take comfort from these numbers, that even though their money isn’t earning much interest in the bank, inflation isn’t eating away at their deposits. They would do well to not rest on their laurels though and consider putting their money to better use.
“2021 could see inflation bounce back with a vengeance. A Brexit supply shock and rapidly reheating economy, pumped up by the vaccine, will almost certainly create material price rises as demand reignites.”
