Consumer price inflation in Britain unexpectedly fell last month, official figures showed yesterday, easing the pressure on the Bank of England to raise interest rates next month.
The Office for National Statistics said consumer prices rose by 4 percent in the year to last month, down from February’s rate of 4.4 percent. The drop was largely due to lower costs for food, nonalcoholic beverages, recreation and air travel.
The decline was the first in seven months and was unexpected. Most analysts thought inflation would stay around February’s level.
The impact was felt immediately in the foreign exchange markets, where traders moved to reduce their expectations of an interest rate increase next month. The British pound dropped to US$1.6260 from US$1.6310 shortly after the data was released.
Meanwhile, higher energy and food prices drove inflation in Germany to 2.1 percent last month compared to the same period last year, above the European Central Bank’s 2 percent threshold, data showed yesterday.
Energy prices in Europe’s top economy were 10.5 percent higher than at the same time last year, the Destatis statistics office said, as oil prices shoot up due to unrest in the Middle East and North Africa.
The year-on-year inflation rate was stable compared to February. On a month-on-month basis, prices were 0.5 percent higher than last month. The data confirmed a preliminary estimate made at the end of last month.
On Thursday last week, the European Central Bank raised interest rates from record lows for the first time since mid-2008, as concerns about inflation outweighed worries over the ongoing eurozone debt crisis.
Nevertheless, European Central Bank President Jean-Claude Trichet allayed fears that the bank was about to embark on a rate hiking cycle.
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