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U.K. Inflation Probably Slowed to 14-Month Low, Economists Say

Feb. 11 (Bloomberg) -- U.K. inflation probably slowed in January to its weakest pace in more than a year as the impact of a sales-tax increase a year earlier faded and retailers cut prices to lure shoppers.

Consumer prices rose an annual 3.6 percent after a 4.2 percent gain in December, the median forecast of 36 economists in a Bloomberg News survey showed. That’s the weakest since November 2010. The Office for National Statistics in London will publish the data at 9:30 a.m. on Feb. 14. A day later, the Bank of England will release new economic and inflation forecasts, which Governor Mervyn King will present at a press conference.

The central bank said Feb. 9 it will pump another 50 billion pounds ($79 billion) into the economy, adding to the 275 billion pounds of bond purchases it has implemented since March 2009. The stimulus is aimed at preventing inflation falling below the bank’s 2 percent target amid what it says is a “weak outlook” for growth.

“We expect consumer-price inflation to trend down steadily” because of “underlying price pressures being diluted by weak economic activity and elevated unemployment,” said Howard Archer, chief European economist at IHS Global Insight in London. “However, much will obviously depend on what happens with oil prices over the coming weeks and months.”

Brent oil has increased 13 percent on the ICE Futures Exchange in Europe in the past four months, boosted by rising tension between Iran and the West over the Persian Gulf country’s nuclear program.

Inflation Letter

The data may force King to write his ninth consecutive letter to the government explaining why inflation is more than one percentage point above the central bank’s goal. King and other policy makers forecast that inflation will slow “sharply” this year.

Britain’s government raised the sales-tax rate to 20 percent from 17.5 percent in January 2011 as part of measures to reduce the budget deficit. That increase will drop out of the annual consumer-price comparison this year.

Separate reports next week may show that jobless-benefit claims rose in January for an 11th month and retail sales declined, according to surveys of economists.

Jobless claims increased 3,000 in January, according to the median of 24 estimates in a Bloomberg survey before a report due on Feb. 15. The fourth-quarter unemployment rate may have held at 8.4 percent, the highest in 16 years. Retail sales fell 0.3 percent, economists said in another survey.

To contact the reporter on this story: Fergal O’Brien in London at

To contact the editor responsible for this story: Craig Stirling at

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