Inflation hits a two-year low of 1.8%

INFLATION has slipped to a two-year low thanks to falling fuel costs.

Prices rose by 1.8 per cent in the year to January compared with a 2.1 per cent increase recorded in December.

The slowdown was driven by a fall in oil prices that has forced retailers to cut costs at the pump. Petrol prices were 2.1p a litre lower in January than the previous month.

Electricity and gas costs have also come down, easing the pressure on families heating their homes. Mike Hardie, head of inflation at the Office for National Statistics, said: ‘The fall is due mainly to cheaper gas, electricity and petrol, partly offset by rising ferry ticket prices and air fares falling more slowly than this time last year.’

Inflation is now growing considerably more slowly than pay – which is rising by 3.3 per cent a year. Tej Parikh of the Institute of Directors said: ‘For the past two years, households have been squeezed between high prices and weak wage growth.

‘With inflation at a two-year low and growing upward momentum in pay packets, consumers are likely to feel less of a pinch. This easing in the cost of living should provide some uplift for the high street just as consumer confidence appears to be waning.’