* CPI stays at 2.7 pct as food and utility bills rise
* Sticky inflation to hold back more BoE stimulus - analysts
* Factory-gate inflation eases to lowest since July
By Olesya Dmitracova and David Milliken
LONDON, Dec 18 British inflation defied
forecasts in November to hold at its highest rate since May,
reducing the scope for the Bank of England to inject more cash
into the struggling economy.
Data on Tuesday showed that annual consumer price inflation
remained at 2.7 percent after a surprise jump in October,
confounding economists' forecasts for a dip to 2.6 percent.
High inflation, which peaked at 5.2 percent last year, has
weighed on consumer spending, holding back the economy's
recovery from its second recession in four years.
Investec economist Philip Shaw said inflation was likely to
rise above 3 percent over the next few months, cutting chances
the BoE will add to its 375 billion pounds of bond purchases.
"We feel a likely rise in inflation is going to result in
the Monetary Policy Committee keeping policy on hold, but much
depends on how weak the economy is," he said.
A fall in petrol prices was not enough to outweigh increased
costs for electricity, gas and food. In addition, services price
inflation rose to 4.2 percent, its highest since December 2011.
Last month, the central bank said inflation was likely to be
much higher over the next 18 months than expected in August. Its
projections showed it would take until the third quarter of 2014
before inflation fell below the BoE's 2 percent target, nine
months later than predicted in August.
Inflation has been above 2 percent since December 2009, and
the target itself has been questioned.
Last week the next BoE chief, now Bank of Canada Governor
Mark Carney, raised the possibility of central banks targeting
nominal gross domestic product -- a mix of GDP and inflation --
rather than a single inflation rate, though he stopped short of
saying this would be right for Britain.
Stubborn inflation deterred some policymakers from approving
another cash boost for the economy in November, and this month
the BoE again voted against more government bond purchases.
Last week, MPC member Paul Fisher told Reuters that he would
wait for signs that inflation was coming down before voting to
extend asset purchases, or quantitative easing.
Other MPC members' views may become clearer when minutes of
their December meeting are released on Wednesday.
Economists are divided over whether QE does much to support
growth and jobs, and some fear it has only lifted inflation.
Weighing into the debate on Tuesday, parliament's
influential Treasury committee called for additional evidence
for its inquiry into QE, including on the policy's effectiveness
and on other unconventional policy measures.
"What role QE can play going forward and how to handle its
unwinding are two important questions," said Andrew Tyrie, who
chairs the committee, adding that the parliamentarians would
question Carney on those issues during a session in February.
A quarterly Bank of England report released on Tuesday
concluded that QE succeeded in boosting money supply throughout
its three rounds.
There was some good news on underlying inflation pressures
from ONS data on producer prices also released on Tuesday.
Annual factory-gate inflation eased unexpectedly in November
to 2.2 percent -- its lowest since July -- from an upwardly
revised 2.6 percent in October, as input costs fell 0.3 percent
on the year. The annual rate of fuel cost inflation eased to its
slowest since February 2011, though imported food costs rose.