The last time rates fell to 1.0% was September 2002, and rates of under 1% were last recorded in June 2002 at 0.6%.
Falls in transport costs, petrol, and recreational and cultural goods were the main contributors to the slowdown.
The drop in inflation signifies a likely meeting between Bank of England governor Mark Carney and Chancellor George Osborne to discuss the continuing decline, as is procedure when inflation is more than 1% off its target.
The continuing slide in oil prices is expected to feed through to a further drop in CPI, as are falling food and motor fuel prices which pulled headline inflation down by 0.4 percentage points in total in the year to November.
Gautam Batra, Investment Strategist at Signia Wealth, commented:
“The supermarket price war and tumbling price of petrol were both expected to take their toll on this month’s inflation figures, but a fall to 1% hadn’t been anticipated so soon. Mark Carney will now, no doubt, be dusting off his best pens as he sits down to write the letter of explanation to Chancellor George Osborne.
“The plummeting price of oil will be highlighted as one of the key causes of this fall in CPI, as the glut trickles down to the pumps, but the overall winners and losers of this global shakeup are still being realised. The US is coming out well at the moment, but as the economy continues to strengthen, further pressure will fall on the Federal Reserve to signal a path towards normalisation in rates at their Fed meeting tomorrow, which could unsettle markets.
“The picture in the UK is less certain due to the looming general election and today’s surprise CPI data. Inflation lurching lower will support Carney’s wait and see stance on interest rates. However, the wider economy is resilient, capacity is being eroded and employment data looks robust, leading us to believe that rate increase expectations have been pushed back too far. A rate rise may come sooner than markets currently expect.”
