British inflation turns positive

Britain's annual inflation rate rebounded slightly in November after two months in negative territory, aided by smaller-than-expected falls in the prices of alcoholic drinks, tobacco and transport. The 12-month Consumer Price Index (CPI) rose by 0.1 percent last month, after registering minus 0.1 percent in both September and October, the Office for National Statistics (ONS) said in a statement.
"Although the prices of many items continue to fall, because they are falling at a slower rate than at the same time last year, the overall effect is a slight rise in headline CPI," added Philip Gooding, head of ONS, in the statement. The rise in inflation took CPI into positive territory for the first time since July. However, the rate has remained at or close to zero for 10 months in a row in the longest run of flat or falling prices since records began, dented by collapsing oil prices.
UK households better placed to cope with rate hike Britain's first rate hike in nearly a decade should have little on spending as households are better placed to cope with higher borrowing costs than last year, a survey commissioned by the Bank of England showed on Tuesday. British households' debt represents a hefty 135 percent of their income, making them potentially sensitive to a rise in interest rates, which financial markets pencil in for late 2016 or early 2017.
But the survey does not foresee an "unusually large effect on household spending". It estimates a 1 percentage point rise in interest rates could reduce aggregate spending by around 0.5 percent as borrowers reduce spending by more than savers increase it. Households have been able to reduce their debts as a share of income in recent years, helped in part by historically low interest rates. The BoE has kept its benchmark rate at a record low of 0.5 percent since 2009.
"Modest improvements in balance sheet positions imply that households are in a slightly better position to cope with an increase in interest rates than they were a year ago," the survey of around 6,000 British households conducted by NMG Consulting said. The survey results also suggest that government spending cuts would continue to weigh on household spending.