UK Feb CPI rises 1.3 pct yr-on-yr, below expectations UPDATE
Tuesday, March 16, 2004 10:35:36 AM
LONDON (AFX) - UK consumer price inflation rose by less than expected in February largely because clothing prices failed to rebound sharply from the turn of year sales, official figures showed.
[This should lower pressure to hike - Mish]
The country's National Statistics office said the annual rate of EU-harmonised CPI fell to 1.3 pct from 1.4 pct the previous month.
Economists had predicted an unchanged annual rate.
The latest figure compares with the Bank of England's statutory 2 pct target - a level which CPI has been stuck below since May 1998.
On a month-on-month basis, CPI rose 0.3 pct, also just below expectations.
NS said the main downward pressure on prices came from a 0.3 pct monthly decline in clothing and footwear prices, which left prices down 4.0 pct on the year.
That compared with a 1.2 pct monthly increase the previous February - a month when retailers usually lift prices after discounting heavily in the new year sales. Meanwhile, NS said there was no discernible impact in the data to suggest sterling's recent rise has kept price gains in check.
While the unexpectedly benign figures may help alleviate concerns over a possible further hike in UK interest rates next month, with the economy nonetheless growing at a healthy rate analysts doubt whether February's inflation numbers mark the beginning of a downward trend in inflation.
"We expect CPI inflation to climb back towards its 2 pct target over the next few months on the back of higher utility and petrol prices," Royal Bank of Scotland economist Ross Walker said.
With the Bank of England aiming to keep inflation at its target in two years time, analysts said it could still hike interest rates in coming months even with inflation well below its target.
[Do analysts everywhere always expect hikes? - mish]
Rate setters last raised the key repo rate by 0.25 points to 4.0 pct in February, the second hike in just three months, and they are widely expected to hike another quarter percent in May.
The central bank justified its last two rate rises by pointing out that inflation was expected to rise above its target in two years time.
RPIX inflation, which excludes mortgage interest payments, rose 0.3 pct for a 2.3 pct year-on-year gain -- again below expectations.
The wider all-items RPI index rose 0.4 pct in February for a 2.5 pct year-on-year gain.
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