UK inflation sees sharpest fall in 3 years – with more to come

Inflationary pressures fell in the UK in December, as CPI consumer price inflation fell back to 4.2% over the year, down from 4.8% for the year to November.

The last time there was a sharper decrease in the annual inflation index was between November and December 2008.

The annual rate of inflation excluding the impact of indirect tax changes, such as VAT, was 2.8% for the year to December, down from 3.4% in November.

In January 2012 the effect of the January 2011 2.5 percentage point VAT hike will drop out of the year-on-year comparisons.