Inflation falls again in January

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Updated on 14 February 2012 | 8 Comments

Both measures of inflation have fallen again, although the Consumer Prices Index rate is still above the Bank of England's 2% target.

Inflation has fallen again, according to the latest figures from the Office for National Statistics (ONS).

The annual Consumer Prices Index (CPI) measure of inflation has fallen from 4.2% in December to 3.6% in January, while the Retail Prices Index (RPI) measure, which includes mortgage interest payments, has fallen from 4.8% to 3.9%.

The CPI is now at its lowest level since November 2010, although it is still well above the Bank of England’s 2% target. The RPI is at its lowest level since February 2010.

The impact of last January's VAT rise is one reason for the significant annual drop.

Food and non-alcoholic beverages, clothing and footwear, furniture and household equipment and transport all fell. However, clothing and footwear prices didn't fall as much between December 2011 and January 2012 as they did a year earlier, reflecting the fact that discounts were steeper in the New Year sales of 2011.

The costs of meat and fish rose slightly but all other food items fell.

Transport costs also fell, mainly due to large increases in fuel last January.

Alcoholic beverages and tobacco rose month-on-month, but fell annually due to last year's VAT increase. Utility bills rose month-on-month but were down annually.

The Bank of England will release its quarterly inflation report on Wednesday (15 February), when it is expected to forecast that inflation will hit the 2% target by the end of the year.

More: How to beat inflation | Earn a rate of 4.65% on your savings

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