The Office for National Statistics said consumer prices rose by 1.3% in the year to December, down from 1.5% the previous month. The consensus in financial markets was that there would be no change in the rate.
The statistics agency said the main downward pressure on inflation came from accommodation services and clothing. A number of Bank of England rate-setters, including outgoing Governor Mark Carney, have hinted that the main interest rate could be cut from 0.75% at the next policy meeting on Jan. 30 given lackluster growth largely due to Brexit uncertainty and below target inflation. The central bank is tasked with setting interest rates to achieve an inflation rate of 2%.
Following the release of the inflation figures, the pound dropped slightly to below $1.30.