U.K. consumer prices rose less than expected in February, reflecting weaker inflation across a broad range of products, but remained well above the Bank of England's target, data Tuesday showed.
Figures from the Office for National Statistics showed that annual inflation slowed to 3% in February, from 3.5% in January. That reflected softer contributions from eight of the 12 sub-sectors, with prices rebounding less than usual after muted start-of-year sales, an ONS statistician said.
The decline should provide some reassurance to BOE Monetary Policy Committee members, who have expressed concerns that persistently strong price growth could push up inflation expectations, resulting in further price gains.
Minutes from the MPC's March meeting warned it was increasingly likely inflation would remain well above target in the coming months, with some members saying upside risks to price growth had increased over the past month.
In February, the MPC suspended its £200-billion ($301.92 billion U.S.) quantitative-easing policy of buying bonds with freshly created central bank money, which it launched in March 2009, having slashed its key interest rate to an all-time low of 0.5%. But it has kept the door open to extending the scheme if the economy doesn't pick up as rapidly as it expects.
Tuesday's figures support the view that the U.K. central bank is likely to have to keep monetary policy loose for some time to come, to compensate for expected aggressive fiscal tightening, strains in the banking system, and weakness in the U.K.'s key trading partners.
Consumer prices increased 0.4% in February, following a 0.2% decline in January. Economists polled by Dow Jones had tipped consumer prices to rise 0.6% on the month and 3.2% on the year. The BOE targets annual inflation at 2.0%.
Annual core inflation -- which excludes volatile energy, food, alcohol and tobacco prices -- also eased in February to 2.9% on the year from 3.1% in January. In monthly terms, it rose 0.4% in February, after a 0.6% decline in January.
Retail price inflation -- traditionally used as a gauge for pay settlements -- was steady on the year in February at 3.7%, slightly below analyst forecasts for it to be 3.8%. In monthly terms, prices grew 0.6% after being flat in January.
