UK inflation drops from to 2%

Data released in the UK yesterday show that inflation had dropped from 2.1 per cent to 2 per cent in December, meeting the government's target for the first time in four years.

The government uses Consumer Prices Index (CPI) as a measure to target inflation and this was the first time since November 2009 the inflation had been at or below this target.

CPI annual inflation, a measure of consumer price inflation including owner occupiers' housing costs, actually was lower at 1.9 per cent in December.

The Office for National Statistics (ONS) said, the largest contributions to the fall in inflation came from prices for food, non-alcoholic beverages and recreational goods and services, which were partly offset by upward contribution from motor fuels.

According to commentators, this vindicated the Bank of England's insistence over past 4 years that external rises in the cost of imports over which there was no control were responsible rather than any domestic demand lead inflation.

According to commentators, the good news for landlords with mortgages or commercial loans was that for the time being there was no pressure from inflation (the main economic target) to increase interest rates.

Welcoming the development UK prime minister David Cameron said it was welcome news that inflation was down and on target. He added, as the economy grew and jobs were created it meant more security for hard-working people.

This meant that savings accounts now beat the effects of tax and inflation and kept people's money growing in real terms, if inflation remained at this level.

However, all of the accounts require that savers tie up their money for periods of between three and five years.

All variable rate accounts do not measure up to 2013's inflation rate. There was also no guarantee of inflation remaining below 2 per cent for the next few years, although official estimates suggested it would remain around that mark.

Last month saw CPI, the official measure of inflation fall from 2.2 per cent to 2.1 per cent, and there were just 48 accounts that beat inflation.

However, most money that savers deposit continues to languish, falling behind rises in the cost of living and overall there were 787 savings accounts on the market that would not keep savers' money growing in real terms.