Steep fall in inflation

My Account
Logout

Create an Evening Standard Account

Use your social network

Save time by using your existing account to sign in to Evening Standard

We'll never share your information or post anything to your account without your permission

Welcome! Sign in here

Use your social network

Save time by using your existing account to sign in to Evening Standard

We'll never share your information or post anything to your account without your permission

Forgot your password ?

Registration

* indicates fields that are mandatory

Email *

Password *

Confirm Password *

First name *

Surname *

Postcode *

Country *

Mobile phone number

Username *

Gender *

Year of birth *

When you sign up...

You will have access to all our online competitions, discounted offers and can post comments on our site.

You will also receive The Weekender newsletter sent every Thursday - it’s full of fantastic offers and ideas for the weekend. You can update your email preferences in your account page when you log in.

Other newsletters and emails

Homes & Property Newsletter - Yes I want to receive the weekly email with all the latest news on property in the capital

Occasionally we would also like to send you relevant emails detailing specific offers either from ourselves or carefully selected partners. If you would prefer not to receive these then please tick the appropriate boxes below. We will never pass on your details.

I do not want to receive additional offers and information from the Evening Standard

I do not want to receive additional offers and information sent by Evening Standard on behalf of carefully selected partners

Terms and Conditions

* I have read, understood and agree to be bound by the terms and conditions of Evening Standard

Registration

Mail Sent for Registration Confirmation.

A confirmation email has been sent. Please activate your account by clicking on the activation link sent in your mail box.

The fall in the annual rate of UK inflation - as measured by the Consumer Prices Index (CPI) - fell to 3.1% from 4.1% in December, according to the Office for National Statistics (ONS).

The drop also marked the first time inflation fell in December since records began, said the ONS.

The fall in CPI is less than experts were expecting, with many pencilling in a drop to as low as 2.6%. But the decrease will heighten fears over deflation as the impending recession is expected to see further falls over the year ahead.

CPI has fallen significantly from a peak of 5.2% last September. And the Retail Prices Index (RPI) last month fell at its fastest rate in more than 28 years, as house price declines and the recent dramatic interest rate cuts added to the VAT impact.

RPI, which includes mortgage interest payments, plunged to 0.9% in December from 3% the previous month.

The ONS said the cut in VAT had the biggest effect on inflation, knocking 1% off CPI in December, with greater early Christmas discounting adding to the fall. Two-thirds of retail prices saw the Government's cut in VAT from 17.5% to 15% passed on last month, added the ONS.

Cut-price promotions saw clothing and footwear deflation of 10.3% last month - its lowest level since official records began in January 1997.

More falls in the price of fuel also combined to knock CPI lower, with the annual rate of fuel deflation at 11.2%.

Graeme Leach, chief economist at the Institute of Directors, said: "Inflation is most definitely yesterday's story. Unless the huge stimulus from the VAT reduction, record low interest rates, a falling pound and the collapse in the oil price begin to take effect soon, the UK will be staring deflation in the face."