Inflation slowed to 2.5 percent in December, believed to be its lowest rate since 2002, according to the latest figures released by the Department of Statistics.

Quarterly comparisons with 2004 show a reduction in consumer price inflation between the first and fourth quarters of 2005, from four percent to 2.7 percent respectively, government statisticians said yesterday.

Between November and December of 2005, the average cost of goods and services in Bermuda?s CPI moved back 0.2 percent. The all-items index declined from 133.3 in December which means that a basked of goods and services which cost $100 in 1995 now costs $133.10.

While Bermuda?s rate of inflation is lower than the 3.4 percent recorded in the United States ? Bermuda?s major trading partner ? in December 2005, it remains slightly ahead of Canada and the United Kingdom where inflation stood at 2.2 percent in December, 2005.

The Rent sector was the largest contributor to Bermuda?s 12-month increase as rent prices advanced 2.7 percent. The Rent sector experienced a 0.1 percent increase from November to December as properties under rent control rose by 0.3 percent.

The average prices of properties not subject to rent control experienced a modest gain.

The Transport and Vehicles sectors also impacted December?s rate of inflation. Despite a 2.2 percent rise in the price for gasoline and a 0.1 percent rise in new vehicles, the sector saw a 1.2 percent decline for the second straight month due to seasonal reductions in overseas hotel rates, statisticians said.

The food sector edged up 0.1 percent for the month with the main contributors cooking oil which rose 2 percent and spaghetti which recorded a 1.4 percent rise.

The health and personal care sector rose 0.1 percent in December 2005 which the Department of Statistics attributed to a 1.9 percent rise in the cost of prescription medicines.

The education, recreation and reading sector moved ahead 0.1 percent in December as a result of a 2.2 percent increase in fuel prices and a 0.7 percent increase in pet care.

The fuel and power sector advanced 0.5 percent month over mointh and 7.8 percent year over year.

The Department of Statistics attributed this rise to a 0.9 percent increase in the cost of electricity as the Fuel Adjustment Clause jumped 3.7 percent from the previous month.

The average cost of household goods, services and supplies remained unchanged from November 2005 while the Clothing and Footwear and Tobacco and Liquor sectors remained unchanged in the month of December, 2005.

The decline in the annual rate of inflation from the beginning of 2005 will be welcome news for Finance Minister Paula Cox, who forecast a three percent rate of inflation for the year in her 2005 Budget Statement.

Many forecasters expected Bermuda?s inflation rate to be higher, given the soaring cost of fuel and the high inflation rate ? 4.0 percent ? at the beginning of the year.

Ms Cox gives the Budget Statement for 2006 on Friday.