Inflation falls to 3%

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Inflation fell by much less than analysts had expected to 3% in January.

The Government's preferred consumer prices index (CPI) fell from 3.1% to 3%, while the retail prices index (RPI) hit 0.1%, down from 0.9% in December. The RPI is thought to have fallen further as it includes mortgage interest costs, which have fallen for some borrowers as the Bank of England cut rates to 1%. Early predictions claimed CPI inflation would fall to 2.7%. Higher prices for furniture, alcohol and clothing offset a fall in energy bills and loan costs. Looking ahead, the Bank of England expects CPI to fall to 0.5% in 2009 and won't return to its 2% target rate until the end ...

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