Annual inflation fell by a percentage point to 3.1% in December even though food price rises are higher than they were last year, according to new figures out today.
The Office for National Statistics (ONS) said the government’s 2.5% VAT cut had the biggest downward impact on the headline figure of inflation (the Consumer Prices Index).
Another large fall was witnessed on the Retail Prices Index, with an annual inflation drop from 3% to 0.9%.
This is the biggest fall in over 28 years.
Chief secretary to the Treasury Stephen Timms said: “The reduction in inflation is obviously welcome – a big reduction down to 3.1% – reflecting in particular, as the ONS has said this morning, the VAT cut before Christmas.”
The British Retail Consortium and KPMG said last week Christmas sales figures were the worst for 14 years but consumers still opted for their traditional meals.
