Fuel bills set to fall in line with inflation

THE rate of inflation fell to a 14-month low last month and is expected to hit the Government’s two per cent target by the end of the year in a further sign that the consumer spending squeeze is loosening its grip.

The consumer prices index (CPI) rate of inflation fell to 3.6% last month, from 4.2% in December, as the previous year’s VAT hike from 17.5% to 20% fell out of the year-onyear comparison.

In a letter of explanation to the Chancellor, Bank of England governor Sir Mervyn King said further falls in petrol and utility prices are on the way.

He added: “The effect of the factors that temporarily pushed up inflation is now waning.”

Economists warned the softer cost of living is likely to weigh down on wage growth.