• As inflation moves towards its 2% target, the MPC should announce an increase in the Quantitative Easing (QE) programme
• Annual CPI down from 4.8% in November to 4.2% in December 2011
• Annual RPI down from 5.2% in November to 4.8% in December
Commenting on the inflation figures for December, published today by the ONS, David Kern, Chief Economist at the British Chambers of Commerce (BCC), said:

“The fall in inflation seen in December, while broadly expected, is welcome. It is likely that the pace of decline will accelerate in the first half of this year, and we expect to see inflation fall to 2% by the end of 2012. Lower inflation will go some way towards easing the squeeze on businesses and individuals. This will make it easier for consumer spending to stabilise, and start increasing gradually later in the year.

“As inflation moves gradually towards the 2% target, the Monetary Policy Committee (MPC) should be confident in persevering with expansionary policies. We expect the MPC to announce a further increase in the Quantitative Easing (QE) programme in February.

“While raising QE is necessary, it must be supported by additional measures that will support growth in the economy. The government must implement its credit easing plans as soon as possible, and so increase the flow of lending to viable businesses. It is also important to scrap the planned increase in business rates, follow through with reforms to our planning system, and make bold moves on reducing red tape, thus making it easier for businesses to expand and create jobs.”