Price Wars Aid Slowdown In Living Cost Rises

The latest inflation figures highlight a further slowdown in rising living costs but the headline rate remains more than double the Bank of England's target.The Consumer Prices measure of inflation (CPI) - the Government's preferred measure - came in at an annual rate of 4.8% in November.That represents a fall of 0.2% on the previous month. The Office for National Statistics (ONS) says the performance reflected falling costs in food, transport and clothing prices. Retailers have been discounting heavily in an attempt to get consumers spending in the run up to Christmas while supermarket price wars also contributed.Food and non-alcoholic drink prices rose at their slowest pace since July 2010.The biggest contributors to the CPI measure were alcohol and tobacco.Electricity and gas rises - announced in the summer - continue to feed into the figures, accounting for a large percentage of the overall figure. The ONS says when other fuels are also taken into account, they rose at an annual rate of 20.9% - the fastest pace since February 2009. The Retail price inflation guage (RPI), which includes more housing costs, fell back to 5.2%.The figures were in line with economists' forecasts.The Bank of England believes inflation has now peaked and the CPI measure should fall back towards its 2% target by the end of next year - aided by weak economic growth.Official data last week suggested producer output price rises had eased further, supporting this view.But experts predict the Bank will inject a further £75bn into the economy in February, when its current round of asset purchases ends, to help boost money supply further.Despite the risk that its quantitative easing policy poses to stoking inflation, events such as last January's VAT increase will soon fall out of the calculations which will help CPI plunge.At a Bloomberg media event today, the Bank's chief economist Spencer Dale predicted that inflation would likely to fall to just over 3% by March. He said: "The behaviour of inflation in the second phase, from the spring of 2012 onwards, is far more uncertain and far more important for the future stance of monetary policy."