Inflation continues its falling streak to 4.2%

Inflation has continued to fall, and the Consumer Prices Index now stands at 4.2 per cent, the Office for National Statistics (ONS) has revealed.

The news has not come as a surprise, as the rate of inflation first fell back in October 2011, and has since fallen by a full percentage point.

The largest downward pressure to the CPI came from petrol, gas and clothing, according to the ONS.

Leading economists believe that this is not the end of inflation's tumble, and that it will play an important part in the UK's economic recovery. Governor of the Bank of England, Mervyn King supports this, with a view that a sharp fall in inflation will occur this year.

If inflation does continue to fall, the Bank will be under less pressure to increase interest rates, which many think is vital to protect homeowners, particularly as unemployment is rising and repossession poses a significant risk.

Some predict that CPI inflation will fall to as little as 3.5 per cent next month, as the impact of the January 2011 VAT hike falls. Commenting, Howard Archer, chief economist at Global Insight said: "It should then head down markedly further due to the waning impact from substantially rising energy, commodity, and food prices in late 2010 and early 2011, and from sterling's marked depreciation. In addition, weakened economic activity and ongoing muted wage growth amid significant (and growing) labour market slack is expected to weigh on underlying inflationary pressures. We suspect that consumer price inflation could fall below 3.0% in the second quarter and be down to the Bank England's target level of 2.0% by the end of 2012."