UK inflation falls

From the BBC:

UK inflation rate falls to 3.6% in January

The cost of living continues to rise, with prices increasing faster than wages

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 the annual inflation rates that year as a result.
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.
However, Labour argued that prices remained high.
"For ordinary families right up and down throughout the country, the fact is prices went up last year, they've stayed up... and incomes of course haven't risen at all," said shadow treasury minister Owen Smith.

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.
The month-on-month comparison showed small falls in the cost of clothing and footwear, furniture and household goods and transport whilst alchohol, household services and health rose slightly.
Analysts say CPI inflation could fall below the 2% target by the end of the year, driven by lower agricultural and commodity prices.
"Inflation expectations tend to follow actual inflation and, given that the CPI appears to be heading sharply lower, we expect inflation expectations to do likewise," James Knightley from ING bank.