The latest data from the Office for National Statistics (ONS) shows that the rate of inflation, as measured by the Consumer Prices Index (CPI), fell from 4.2% in December to 3.6% in January.

The rate of inflation according to the Retail Prices Index (RPI) fell from 4.8% to 3.9% over the same period.

The CPI rate is the lowest for 14 months, but is still considerably higher than the 2% target set by the Bank of England. The Government predicts that the rate will continue falling in 2012.

A statement released by the Treasury read: “Inflation fell significantly in January for the second month in a row, which is good news for family budgets. The Bank of England and other forecasters expect inflation to keep falling through this year, providing additional relief.”

But shadow treasury minister Owen Smith highlighted the fact that price increases from 2011 haven’t been reversed, whilst incomes “haven’t risen at all.”

Prices are actually increasing at nearly twice the rate of wages, and this is causing real difficulties for those on low incomes, and groups such as pensioners.

In a letter to the Treasury, Bank of England Governor Mervyn King wrote:

“Although inflation is now falling broadly as expected, the process of rebalancing still has a long way to go. Growth remains weak and unemployment is high.”

Some experts forecast that the CPI inflation rate will drop below 2% before the year ends, but this will be of little comfort to families, workers and retirees who are struggling at the moment.

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