AFP

LONDON BRITAIN’S 12-month inflation rate fell sharply in January to a 14-month low, official data showed on Tuesday, as the previous year’s sales tax hike fell out of the year-on-year comparison.

Annual Consumer Prices Index (CPI) inflation slowed last month to 3.6 percent, the Office for National Statistics said in a statement. That was the lowest level since November 2010 and compared with 4.2 percent in December.

The January figure was roughly in line with market expectations for a drop to 3.5 percent, according to analysts polled by Dow Jones Newswires. The Conservative- Liberal Democrat government increased value-added tax (VAT) on goods and services to 20 percent in January 2011 as it sought to slash a huge deficit that was inherited from the previous Labour administration.

“A factor from last year — the increase in the standard rate of Value Added Tax in January 2011 to 20 percent from 17.5 percent — is a significant contributor to the falls in ... annual inflation between December 2011 and January 2012,” the ONS said.

“This rise in taxation led to upward pressures on prices between December 2010 and January 2011. There were, however, no such pressures on prices between December and January this year.” Inflation also eased last month on the back of smaller price increases for fuels, alcohol and tobacco, household bills and other goods and services.