UK inflation rate falls to 3.6% in January (Article by BBC Business News on 14.02.2012)

14 Feb
Pound notes

Inflation fell sharply in January as the impact of last year’s VAT rise was no longer shown in the figures.

Consumer Prices Index (CPI) inflation in the UK fell to 3.6% in January, down from 4.2% in December, according to the Office for National Statistics (ONS).

Retail Prices Index (RPI) inflation – including mortgage interest payments – fell to 3.9% from 4.8%.

VAT went up from 17.5% to 20% in January 2011, pushing up inflation that year.

The drop brings CPI inflation to a 14-month low. However, the rate remains well above the Bank of England’s 2% target.

The government said it expected the inflation rate to continue to fall this year.

“Inflation fell significantly in January for the second month in a row, which is good news for family budgets. The Bank of England and other forecasters expect inflation to keep falling through this year, providing additional relief,” said a statement from the UK Treasury.

In addition to the impact of VAT, smaller increases in the cost of commodities and oil than seen a year earlier also helped to bring the inflation rate down, according to the ONS.

The average price of petrol in January rose by 0.6p a litre, compared with a 5.4p rise last year.

Diesel was up 0.7p a litre, compared with a 5.8p rise in January 2011.

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