* Airfares lift UK consumer price inflation to 2.7 pct
* Economists say CPI still on track to fall gradually
By David Milliken and Olesya Dmitracova
LONDON, June 18 British inflation rebounded more
than expected in May, data showed on Tuesday, primarily because
of rising air fares and in contrast to April's seven-month low.
Economists found little significance of the rise, seeing the
inflation outlook ahead as generally benign.
Annual consumer price inflation rose to 2.7 percent in May
from April's low of 2.4 percent, a bigger increase than
economists had forecast though still below March's level, the
Office for National Statistics said.
Market reaction was limited, and economists said they still
believed inflation was on track to return to its 2 percent
target sooner than the Bank of England had expected a few months
ago because the pound has strengthened and commodity prices
May's 22 percent rise in airfares - the biggest jump for the
time of year since records started in 2001 - did not change the
broader picture of slowly falling inflation, economists said.
"Looking over a two or three month horizon, which I think
you have to do, the inflation picture is a little better. But it
is still above target and still a little bit sticky," said Ross
Walker, an economist at Royal Bank of Scotland.
Economists had expected some rise in inflation this month as
there had been a sharp fall in the annual rate of inflation in
Nonetheless, the overall outlook for inflation is more
benign than it seemed a few months ago.
Last month the central bank forecast inflation would peak at
just over 3 percent later this year before falling back to 2
percent by early 2015 - a view still broadly shared by
economists after Tuesday's data.
Separate figures published by the ONS on Tuesday also showed
a relatively muted outlook for consumer price inflation. Factory
gate prices - which act as a leading indicator for some parts of
CPI - rose by an annual 1.2 percent, a smaller increase than
economists had forecast.
But Britain's unusually cold weather this year may push up
food prices, with the ONS reporting a 19.2 percent annual rise
in the cost of home-grown food, and potatoes and fresh
vegetables particularly hit.