UK Inflation Eases More Than Forecast

UK inflation eased more-than-expected to a 7-month low in February, as the effects from the deterioration in pound after the Brexit vote fades.

Consumer price inflation slowed more-than-expected to 2.7 percent from 3 percent in January, figures from the Office for National Statistics revealed Tuesday.

This was the weakest figure since last July, when prices rose 2.6 percent. Economists had forecast an annual rate of 2.8 percent.

Underlying inflation that excludes energy, food, alcoholic beverages and tobacco, eased to 2.4 percent from 2.7 percent in the previous month. Core prices were expected to gain 2.5 percent.

On a monthly basis, overall consumer prices climbed 0.4 percent, but slightly slower than the expected 0.5 percent.

"A small fall in petrol prices alongside food prices rising more slowly than last year helped pull down inflation," ONS statistician Phil Gooding said.

"Many of the early 2017 prices increases due to the previous depreciation of the pound have started to work through the system."

The decrease in inflation does not significantly diminish the case for a near-term rate hike, Paul Hollingsworth, an economist at Capital Economics, said. The timing of Easter could push inflation back up a bit in March.

The Bank of England is widely expected to keep its key interest rate unchanged at 0.50 percent at its monetary policy committee meeting this week.

Another report from ONS showed that output price inflation slowed to a more than one year low in February. Nonetheless, output price inflation has been positive since July 2016.

Output prices grew 2.6 percent annually in February, the weakest since November 2016, versus 2.8 percent rise a month ago.

On month, output prices remained flat after rising 0.1 percent in January. Economists had forecast output prices to rise 0.1 percent from January and 2.6 percent from last year.

At the same time, input price inflation eased to 3.4 percent in February from 4.5 percent in January.

On a monthly basis, input prices dropped 1.1 percent on month, in contrast to previous month's 0.4 percent increase. Prices declined for the first time since last August and was also the biggest fall since January 2016.