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UK inflation rate lower at 2.7% UK inflation rate lower at 2.7%
(10 minutes later)
Britain's inflation rates eased more than expected in January after hitting an 11-year high in the previous month.Britain's inflation rates eased more than expected in January after hitting an 11-year high in the previous month.
The Consumer Prices Index fell to 2.7% from 3%, according to the Office for National Statistics (ONS).The Consumer Prices Index fell to 2.7% from 3%, according to the Office for National Statistics (ONS).
The Bank of England has raised interest rates three times since August in a bid to bring inflation down to a 2% target.The Bank of England has raised interest rates three times since August in a bid to bring inflation down to a 2% target.
The main cause of the fall was lower transport costs, while food prices also fell. However, many analysts expect the inflation rate to rise again soon.The main cause of the fall was lower transport costs, while food prices also fell. However, many analysts expect the inflation rate to rise again soon.
While CPI fell to 2.7%, the retail price index (RPI), which is used for most wage negotiations, also dropped by more than had been forecast, to 4.2% from 4.4% a month earlier.While CPI fell to 2.7%, the retail price index (RPI), which is used for most wage negotiations, also dropped by more than had been forecast, to 4.2% from 4.4% a month earlier.
Looking forward, it is expected that lower wholesale gas prices could lead to cheaper utility bills in coming months. However, petrol prices climbed slightly in January.Looking forward, it is expected that lower wholesale gas prices could lead to cheaper utility bills in coming months. However, petrol prices climbed slightly in January.
'Concerns' 'Relief'
This is a much more benign set of inflation data than expected, which will be of major relief to the Bank of England Howard Archer, economist, Global Insight Personal impact of inflation Inflation Q&AThis is a much more benign set of inflation data than expected, which will be of major relief to the Bank of England Howard Archer, economist, Global Insight Personal impact of inflation Inflation Q&A
If the rate had increased to 3%, as some had feared, Bank of England governor Mervyn King would have had to write a letter to the government explaining the reasons behind the increase.If the rate had increased to 3%, as some had feared, Bank of England governor Mervyn King would have had to write a letter to the government explaining the reasons behind the increase.
"This is a much more benign set of inflation data than expected, which will be of major relief to the Bank of England," said Howard Archer, an economist with Global Insight."This is a much more benign set of inflation data than expected, which will be of major relief to the Bank of England," said Howard Archer, an economist with Global Insight.
While the 3% level was not reached, the latest consumer price inflation figures remained above the government's target of 2%, as has been the case for nine consecutive months.While the 3% level was not reached, the latest consumer price inflation figures remained above the government's target of 2%, as has been the case for nine consecutive months.
JP Morgan economist Malcolm Barr said that since inflation was "likely to remain high through the first quarter, and the Monetary Policy Committee (MPC) sensitive to the upside risks to its inflation objective, our forecast anticipates a further move upward in interest rates at one of the next two meetings".JP Morgan economist Malcolm Barr said that since inflation was "likely to remain high through the first quarter, and the Monetary Policy Committee (MPC) sensitive to the upside risks to its inflation objective, our forecast anticipates a further move upward in interest rates at one of the next two meetings".
This view was echoed by Global Insight's Mr Archer who said recent evidence showed that service companies, manufacturers and retailers were looking to raise their prices "wherever possible to boost their margins".
"Consequently, we still think interest rates will reach 5.5%, but this should prove to be the peak," he said.
The news should soothe some of the MPC's concerns Philip Shaw, chief economist, Investec SecuritiesThe news should soothe some of the MPC's concerns Philip Shaw, chief economist, Investec Securities
December's increase in consumer price inflation was echoed by a rise in the RPI - which includes mortgage interest payments and is often used as a basis for wage demands - to 4.4%, its highest level since 1991.December's increase in consumer price inflation was echoed by a rise in the RPI - which includes mortgage interest payments and is often used as a basis for wage demands - to 4.4%, its highest level since 1991.
Philip Shaw, chief economist with Investec Securities, said he expected the inflation numbers to be a relief for Mr King.Philip Shaw, chief economist with Investec Securities, said he expected the inflation numbers to be a relief for Mr King.
"The news should soothe some of the MPC's concerns," he said. "The news should soothe some of the MPC's concerns," he said but added that inflation would likely remain "uncomfortably high" until March, when the impact of energy prices would be seen.
But he added that seasonal food prices were tipped to be higher last month, while reductions on clothing and footwear were less dramatic than they had been in the sales a year earlier.
Mr Shaw said he thought inflation would remain "uncomfortably high" until March, when the impact of energy prices would be seen.