Prices fall to lowest in seven years

Retail prices fell 1.54 per cent year on year in January, according to the latest BRC figures. The organisation claimed that inflation is the lowest since 1998. The drop of 0.3 per cent since December is the fourth consecutive fall since September.

The greatest discounts were in non-food, where prices fell 1.33 per cent in the past month alone. In contrast, food prices increased by 1.34 per cent, as Christmas promotions on beer, wines and spirits came to an end.

BRC director-general Kevin Hawkins (pictured) again called for interest rates to be cut by the Monetary Policy Committee, which is meeting to set rates today. He said: 'The heavy discounting since the beginning of December became more aggressive throughout the January Sales, with many retailers making further reductions and sharp price cuts in the hope of compensating for the disappointing Christmas. However, consumer confidence remains weak and the Bank of England must seriously consider a gradual reduction in interest rates. Any further increases simply cannot be justified.'

Hawkins' call was in part answered later this afternoon when the Bank of England confirmed that interest rates would stay at 4.75 per cent.