UK inflation rises 0.1% year-on-year in November, as expected

UK inflation returned with a 0.1% rise in November compared to a year ago, after the previous month's 0.1% decline.

The Office for National Statistics said the prices of food and motor fuels continued to fall on the year while rents, restaurant and hotel bills were rising.

On month-on-month comparison, the consumer price index came in at 0.0% in November, better than the 0.1% drop that was forecast but worse than the previous month's 0.1% gain, as prices of transport costs, alcohol and tobacco declined.

"The latest consumer prices figures confirmed that the UK’s brief flirt with deflation came to an end in November, but price pressures look set to remain subdued for a long while yet," said Paul Hollingsworth, UK economist at Capital Economics.

Capital Economics expects inflation to average around 1% next year so the Bank of England's Monetary Policy Committee will be in no rush to raise interest rates.

Howard Archer, chief UK and European economist at IHS Global Insight, said he saw CPI reaching 1% in the third quarter of 2016 before rising to 1.5% by end of 2016 and 2% around mid-2017.

"We maintain the view that the Bank of England is more likely than not to raise interest rates by mid-2016," he said, predicting a move in May.

"However, we doubt interest rates will end 2016 any higher than 1% - and it is far from inconceivable that the Bank of England may only raise interest rates once to 0.75% during next year."

Further out, Archer predicted the BoE will only lifting interest rates to 1.75% by end-2017 and 2.25% by end-2018.