James Forsyth

Inflation falls as the VAT rise drops out

Inflation falls as the VAT rise drops out
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Late last year, the Tory party’s brains trust found that the inflation numbers corresponded directly to whether or not people thought that the economy was on the right track. When inflation was going up double-quick, the ‘wrong track’ numbers went up. But when the pace of inflation slowed, the ‘right track’ numbers increased.

It is for this reason that the Tories are quietly confident that this year will see an uptick in economic confidence. They expect the inflation rate to fall steadily throughout the year as the VAT rise drops its way out of the calculation and the effects of the oil shock recede.

Obviously, though, today’s inflation numbers will be crowded out of the headlines by Britain’s AAA rating being put on negative outlook by Moody’s. The big economic question remains whether the coalition can create an environment that fosters growth even as the eurozone remains in the doldrums