March 24, 2009

Britain’s consumer price index rises

February retail and consumer prices in Britain indicate that deflation held off for another month, government figures showed.

The Retail Price Index in February came in a flat zero percent, falling from January's 0.1 percent, but the Consumer Price Index rose from 3 percent in January to 3.2 percent, the Office for National Statistics reported Tuesday.

Core consumer prices, excluding energy and food costs, rose from 1.3 percent to 1.6 percent in the month, an indication that falling currency rates are working ... through to the high street, Vicky Redwood, an economist at Capital Economics told The Times of London.

In a letter to Chancellor of the Exchequer Alistair Darling, Bank of England Gov. Mervyn King said the inflation rate was higher than expected.

This could reflect pass-though of the exchange rate depreciation to consumer prices since much of the strength of the outturn appears to be concentrated in components where a large share of goods are imported, the letter said.

While deflation held off for another month, the BOE now expects inflation to fall sharply.

The bank forecasts the Consumer Price Index will drop below 2 percent, falling to near zero though 2011, The Times said.