LONDON (Reuters) - British inflation hit a nine-month high in February and looks set to rise further, but many economists said they still expect the Bank of England to give more help to the stagnant economy.
Annual consumer price inflation rose to 2.8 percent, in line with economists’ forecasts, after holding steady at 2.7 percent since October, the Office for National Statistics said.
Inflation has exceeded the central bank’s 2 percent target since December 2009. Economists said Tuesday’s figures would probably not reduce the chances that the Bank of England will sooner or later pump more money into Britain’s economy.
“What does it mean for the Bank of England? Not a lot. I don’t think high inflation will act as a deterrent to their desire to do something else if they want to,” said Peter Dixon, an economist at Commerzbank.
“You very much get the sense that they are more interested in growth than they are in inflation at the current time.”
Sterling rose against the dollar after the inflation data, however, suggesting some investors see less leeway for the Bank of England to ease monetary policy further.
Bank’s governor Mervyn King and two other policymakers voted to resume the central bank’s programme of asset purchases last month. But other policymakers think there could be better ways to help Britain’s economy, which is teetering on the edge of its third recession since 2008.
Chancellor George Osborne is widely expected to announce a review of the central bank’s remit in his annual budget statement on Wednesday, and the arrival of new Bank governor Mark Carney in July may herald more changes.
High inflation has cut into British households’ disposable income, and a further rise will be a concern to the government, which is already looking ahead to a 2015 election.
The Bank forecasts inflation will exceed 3 percent later this year due to upward pressure on the cost of imported goods and raw materials caused by sterling’s near 7 percent slide against the dollar since the start of 2013 and higher utility bills.
Tuesday’s data suggested this was well underway. February’s increase in consumer prices was driven by a mix of rises in household gas and electricity bills, higher petrol prices and increased costs for video games and photo equipment.
Factory gate prices showed their biggest month-on-month jump since April 2011, rising by 0.8 percent, propelled by a 3.2 percent jump in manufacturers’ input costs.
Crude oil prices rose 7.1 percent in February alone. This was their biggest surge since last August, pushed up by a mix of higher global prices for oil and the weaker pound.
King said last week that the central bank was not seeking any further fall in sterling, which now appeared to be fairly valued, and Bank policymaker Ian McCafferty said the inflation consequences of a further rapid fall would be “damaging”.
Last month the Bank’s forecast that inflation would exceed its 2 percent target until early 2016, pushed up by long-term rises in energy prices and university tuition fees.
Reporting by David Milliken and William Schomberg; Editing by Catherine Evans