15/01/13
The yearly rate of inflation remained at 2.7 per cent for the third successive month largely due to energy bill increases over the cold season, figures showed.
The Consumer Price Index (CPI) did not change during December, according to the Office for National Statistics (ONS), but some economists have predicted it could increase to more than 3 per cent in the warmer months.
At the end of last year, price rises came into effect at four of the "big six" energy companies, which dampened the effect of a drop in the price of fuel.
Housing and property costs, such as electricity and gas, increased by 2 per cent between November and December.
However, transport cost rises dropped, with a 2.8p per litre dip in petrol prices between November and December. This is in comparison with a 1.1p fall one year before.
The price of diesel dropped by 1.4p per litre, in comparison with 12 months ago, according to the ONS.
Statistics also showed that the rate of the Retail Prices Index (RPI), which is inclusive of property costs, increased to 3.1 per cent from December's 3 per cent. This was also given a boost because of rising fuel bills.
According to experts, inflation will fail to stay at 2.7 per cent for long, as inflation on food is expected to rise over the next few months.
There was, however, some encouragement as the first decline in the rate of core inflation since July was recorded.
Chief UK economist at Capital Economics, Vicky Redwood, said: "In other words, sluggish consumer demand seems to have prompted retailers to discount a bit more heavily than last year over the festive period."
She did, however, predict that CPI is likely to remain relatively high for the majority of 2013.
A spokeswoman for the Treasury said inflation was almost half of its peak of 5.2 per cent, and that the Government had done more to come to the aid of families' living costs.
That includes a rise in the tax-free personal allowance and aborting the fuel duty rise which was due in January.
It is looking likely that the economy suffered a new contraction during the final three months of 2012, according to estimates, and the country could be looking at an unprecedented triple-dip recession.
However, the Bank may be reluctant to give the go ahead for further quantitative easing (QE), considering the outlook for inflation.
