Retailer discounts trigger inflation drop
18 January 2012 10:07
Pressure on household incomes eased in December as high street discounts in the Christmas period triggered the largest drop in inflation in nearly three years.
A fall in clothing prices - driven by retailers slashing prices in a bid to pull in customers - ensured the overall rate of consumer prices index (CPI) inflation dropped to 4.2% in December from 4.8% in November.
Economists said the drop, which came after a sustained period of high prices and slow wage growth, paved the way for the Bank of England to pump billions of pounds of extra cash into the economy and hold interest rates at 0.5% for months to come.
While any decline will be welcomed, there were warnings that CPI is still more than twice the Government's 2% target.
The fall in clothing prices was driven by a wide range of garments, with a particularly large drop in women's outerwear, the ONS said.
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