(Corrects region in paragraph 14 to "excluding the capital"
from "excluding the capital and the south east of England")
LONDON Feb 18 British inflation last month fell
below the Bank of England's target level for the first time in
over four years, further bolstering the BoE's message that there
is no rush to raise interest rates.
Consumer prices rose 1.9 percent on the year in January,
slowing from December's rate of 2.0 percent, making it the
smallest increase since November 2009, the Office for National
Economists taking part in a Reuters poll had expected
inflation to stay at 2.0 percent.
Before December last year, annual inflation exceeded the
Bank of England's 2 percent target every month since December
2009, eroding the spending power of households and making the
fall in living standards a big political issue ahead of next
Last Wednesday the BoE said it would look at a broader range
of measures of slack in the economy than just the unemployment
rate when considering whether to raise borrowing costs, and that
it was in no rush to hike rates.
Tuesday's inflation reading is likely to reinforce its case,
although separate ONS figures also released on Tuesday showed
the annual rate of house price growth had returned to October's
three-year high, led by double-digit rises in the London area.
The ONS said the biggest negative contribution to the annual
consumer price inflation rate in January was from recreation and
culture, furniture and household goods, and alcoholic beverages
and tobacco, which showed their smallest price increase since
An underlying measure of inflation, which strips out
increases in energy, food, alcohol and tobacco, rose by 1.6
percent in January compared with the same month last year, its
smallest increase since June 2009.
Compared with the previous month, the consumer price index
in January fell 0.6 percent, reflecting seasonal discounting.
Data also released by the ONS on Tuesday showed that factory
gate prices rose by 0.9 percent in annual terms, slightly faster
than economists' predictions of a 0.7 percent increase.
Core producer prices rose 1.2 percent, their biggest annual
increase since May 2012, but this may start to ease as
manufacturers' raw material costs showed their biggest annual
fall since September 2009.
House prices across Britain rose by 5.5 percent in the 12
months to December, up from 5.4 percent in November, the ONS
also said on Tuesday.
Increases were concentrated in London, where prices were
12.3 percent higher than a year earlier, the biggest rise August
But excluding the capital, prices in Britain were just 3.3
The Bank of England last month ended one of Britain's
programmes aimed at stimulating mortgage lending and has
stressed it will keep a close eye on the housing market amid
fears of a property bubble.
The ONS measure of house prices in the 12 months to December
compared with increases of 8.8 and 7.3 percent reported for
January by lenders Nationwide and Halifax.
(Reporting by Andy Bruce and David Milliken)