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Economists react as inflation beats 2% target

19 Feb 2014

Inflation has fallen below the Bank of England’s 2% target for the first time in more than four years. January figures from the Office for National Statistics (ONS) show that the annual rate of inflation hit 1.9%, welcome news for consumers across the UK.

This fall gives support to the Bank’s recent announcement that interest rates will not rise for at least a year.

Samuel Tombs, economist at Capital Economics, commented: ‘This should enable real earning to rise for the first year since 2007’.

Chief economist at the British Chambers of Commerce, said, ‘An economic environment of low inflation and low interest rates allows people and firms to plan ahead, as they can be confident they will not encounter any unwelcome surprises.

‘It is now up to the chancellor to use next month’s budget to implement measures to boost enterprise and wealth creation’.

The impact for individuals may be less noticeable, according to Howard Archer, chief economist at IHS Global Insight: ‘The squeeze on consumers’ purchasing power remains significant given that inflation at 1.9% in January is still running at double average annual earnings growth of 0.9% in the three months to November’.

Frances O’Grady, general secretary of the Trades Union Congress (TUC), agreed, saying, ‘Hard-pressed working people need far stronger pay rises before they can feel the benefit of falling inflation’.