Inflation holds steady at 1.6%
INFLATION remained steady at 1.6% for the third month in a row in February as higher transport costs were offset by price cuts on the struggling High Street.
Experts had predicted that the Consumer Price Index would rise slightly during the month to 1.7% as the high price of oil filtered through to the petrol pumps.
Analysts said the figure would give the Bank of England extra breathing space over its decision for the next move in interest rates.
The 1.6% figure remains below the Bank's 2% target, but is still high compared to the last half of 2004. The Bank expects the inflation rate to rise above the 2% target within the next two years.
Howard Archer, UK chief economist at Global Insight said retailers were finding it difficult to pass on higher manufacturing costs to consumers. He said: 'This eases pressure for an interest rate hike in the very near term, giving the Bank further scope to stand back and gauge the strength of the economy, particularly consumer spending.' Archer believes a rate rise is now likely in June rather than in May, as he originally predicted.
Airfares and seasonal food rose in price during the month, but the cost of furniture and household products was subdued. There were also bargains on the High Street for computer games and toys during February as retailers struggled to shift stock.
