Economy slows sharply in early 2008

LONDON (Reuters) - Britain's economy lost momentum at the start of the year with growth falling clearly below trend for the first time since mid-2005, according to the National Institute of Economic and Social Research.

Growth in the three months to end-February was 0.5 percent after a downwardly-revised 0.4 percent in the three months to end-January.

Official figures show Britain's economy grew by 0.6 percent in the fourth quarter of 2007 after 0.7 percent in the third.

The Bank of England believes some degree of slowing is necessary to contain inflationary pressures. It held rates steady at 5.25 percent this month after quarter-point cuts in both February and December.

"This period of below average growth is to be welcomed," NIESR said. "It does not suggest the economy has slowed sufficiently sharply for the Bank of England to make further interest rate cuts a priority."

(Reporting by Christina Fincher)