U.K. Inflation May Have Stayed at Lowest in More Than Two Years

U.K. inflation may have remained at its lowest level in more than two years in May as oil and food prices fell and the euro-area debt crisis hurt economic activity.

Consumer prices rose an annual 3 percent last month, the same as in April, according to the median forecast of 29 economists surveyed by Bloomberg News. April’s reading was the lowest since February 2010.

Bank of England Governor Mervyn King said earlier this week that the case for more stimulus to aid Britain’s economy is “growing” as he unveiled measures to fight an escalation of Europe’s debt crisis. Food and crude-oil prices are falling, which may give the Monetary Policy Committee more room to restart its quantitative easing program to bolster growth.

“Consumer-price inflation should head down further over the coming months,” said Howard Archer, an economist at IHS Global Insight in London. “This should facilitate further QE by the Bank of England. It will also help economic activity by easing the squeeze on consumers’ purchasing power.”

The Office for National Statistics in London will publish the inflation data at 9:30 a.m. on June 19. A day later, the Bank of England will publish the minutes of this month’s policy meeting, which will show how officials voted on the decision to leave their stimulus program on hold.

Turmoil in the euro area has dented confidence in the U.K. and darkened recovery prospects. The economy shrank 0.3 percent in both the first quarter and the last three months of 2011.

In May, the central bank forecast annual consumer-price gains would slow to 2 percent by about the middle of next year and to about 1.6 percent in two years. Factory-output prices unexpectedly fell 2.5 percent in May as energy prices declined, the statistics office said on June 8.

In addition, global food prices had their biggest drop in more than two years in May as the cost of dairy products slumped. An index of 55 food items tracked by the United Nations’ Food & Agriculture Organization fell 4.2 percent from April, the Rome-based agency said earlier this month. It was the biggest percentage drop since March 2010.

To contact the reporter on this story: Scott Hamilton in London at shamilton8@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net