UK inflation falls to 3.6%

The UK consumer prices index has fallen to 3.6 per cent in January, according to the Office for National Statistics.

The consumer prices index is down 0.6 per cent from 4.2 per cent in December. The retail prices index fell to 3.9 per cent, from 4.8 per cent in December.

The ONS has cited the rise in VAT from 17.5 per cent to 20 per cent in January 2011 as a significant contributor to the fall in both CPI and RPI between December 2011 and January 2012. The increase led to an increase in prices between December 2010 and January 2011. The ONS says there were no such pressures on prices between December 2011 and January 2012.

The ONS says the largest downward pressures on CPI came from fuels & lubricants, products bought in restaurants and cafes, tobacco, vehicle maintainance & repair, the purchasing of new vehicles and alcohol consumption. Annual inflation has now fallen by 1.2 per cent in the past two months.

The largest downward pressures to RPI came from motoring expenditure, alcoholic drinks, food and tobacco. At 3.9 per cent, RPI now stands at its lowest level since February 2010, when it stood at 3.7 per cent.

The Bank of England’s target rate for CPI is 2 per cent. In December 2011, Bank of England executive director and chief economist Spencer Dale said inflation would fall to around 3 per cent as early as March 2012.