UK inflation falls as shops discount and VAT hike falls out

Link to the article The Guardian

Bank of England governor Sir Mervyn King is likely to signal on Wednesday that he stands ready to unleash a fresh round of quantitative easing if the economy fails to bounce back, after news that inflation dropped sharply last month, to 3.6%.

The office for national statistics said the consumer price index had declined from 4.2% in December, to 3.6%, its lowest level since November 2010, as the impact of the coalition's VAT rise dropped out of the annual comparison.

"The confirmation that inflation is falling is likely to encourage the MPC to continue to gradually expand QE in order to give more support to the economy," said Michael Saunders, UK economist at Citi.