Fall in inflation but no reason to celebrate

Reports are that inflation is falling at last, after reaching a high last September. In January inflation reached 3.6%, which was down from 4.2% in December and well below 5.2% it reached in September. But that is still above the 2% target set by the Government

One report states that an average family will still need to spend £1259 extra a year to have the standard of living they had at this point a year ago. An individual will need  to spend £524 extra a year.

Obviously one of the major factors in the drop in inflation is VAT. We shave seen two rises in VAT over recent years, one back up to 17.5% and the second in January last year to the current rate of 20%.

Forecasters expect inflation to keep falling throughout the year but as Mervyn King, governor of the Bank of England said “…. inflation is now falling broadly as expected, the process of rebalancing still has a long way to go. Growth remains weak and unemployment is high.”