Britain's headline inflation rate stayed below zero for a second month in October, and the big factor keeping it down was university tuition fees. A lesser role was played by food, alcohol, and tobacco costs.
The picture isn't universally weak, however. The core inflation rate, which excludes those last three things as well as energy prices, picked up slightly to 1.1 percent. It's not a big jump, to be sure, but it was more than the 1 percent economists had forecast in a Bloomberg News survey, and helped lift the pound against the dollar.
Central bank Governor Mark Carney has said it's important to monitor the core rate. The one-off factors that keep the headline consumer-price index low can drop out pretty quickly, and once they do, there's a risk inflation will overshoot the bank's 2 percent goal, something it's keen to avoid.
So while today's report gives the Bank of England room to keep its benchmark borrowing rate at the current record-low 0.5 percent, officials are mindful of the risks from leaving policy too loose for too long.
"CPI inflation still looks likely to rebound over the coming months, giving the Monetary Policy Committee the green light to start raising interest rates from the second quarter of 2016," said Samuel Tombs, an economist at Pantheon Macroeconomics in London. The inflation rate "is now at its low point and is likely to pick up sharply to about 1% by March and 2% by the end of 2016."
source: Bloomberg
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