• Annual CPI inflation down from 4.2% in December 2011, to 3.6% in January 2012
• Annual RPI inflation down from 4.8% in December 2011 to 3.9% in January 2012

Commenting on the inflation figure for January published by the Office of National Statistics (ONS), David Kern, Chief Economist at the British Chambers of Commerce (BCC), said: “The further drop in inflation seen in January was widely expected and we believe it will continue to fall throughout 2012, until it reaches its two percent target in the first half of 2013. However, expectations that it will fall below target for a prolonged period are premature.

“Falling inflation will help reduce the squeeze on businesses, make it easier for consumer spending to rise, and reassure the MPC about its recent decision to increase QE to £325bn.

“But we now need more forceful measures to support growth in the economy. The government must announce a substantive credit-easing plan as soon as possible to improve the flow of lending to businesses. The idea of an SME bank should also be seriously considered given the difficulties that small firms are facing in obtaining credit on reasonable terms. The upcoming Budget gives the Chancellor an opportunity to announce a package of comprehensive measures to enable businesses create jobs and drive the recovery.”

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