UK inflation

Sep 2001 2.3% Oct 2001 2.3% Nov 2001 1.8% Dec 2001 1.9% Jany 2002 2.6% Feb 2002 2.2%

The annual rate of inflation excluding mortgage repayments fell to 2.2% in February, down from 2.6% in January, the Office for National Statistics said.

Inflation including mortgage repayments - which vary according to the level of interest rates - fell to 1.0% a year from 1.3% in January.

The decline suggests that inflationary pressures are easing, relieving pressure on the Bank of England's Monetary Policy Committee to put up interest rates at its next meeting on April 3 and 4.

"This is all very positive. This reaffirms the view that interest rates are on hold for a while," said Jeremy Hawkins, economist at the Bank of America.

January blip?

The Bank has been set an inflation target of 2.5% a year by the government, but it is allowed to over or undershoot it by one percentage point.

In January, underlying inflation edged above 2.5% for only the second time since April 1999, reinforcing the view that higher borrowing costs were around the corner.

But most economists attributed January's sharp rise in inflation to the one-off impact of higher oil prices and an increase in seasonal food prices, and predicted more moderate price growth later in the year.

The ONS said last month's drop in inflation was due largely to a slower than usual recovery in clothing prices after the January sales season.

Lower fresh vegetable prices also contributed towards the lower rate last month, the ONS said.

Interest rate outlook

The Bank of England last year cut interest rates by two percentage points to a 37-year low of 4% in an attempt to stave off recession.

Analysts have been predicting since the start of the year that the next move in interest rates will be upwards, citing signs of stronger economic growth and persistently high consumer spending and borrowing figures.

Last year's rate cuts have encouraged many consumers to go on a debt-fuelled spending spree.

However, Bank of England officials have downplayed the prospect of imminent interest rate increases in recent weeks.

Statistical switch

Government statisticians last month changed the average basket of goods used to calculate inflation in order to keep pace with changing consumer tastes, the ONS said on Monday.

The new statistical sample now includes DVD players and disposable cameras, while canned salmon, pipe tobacco, and loose tea - included in the basket since 1947 - have been ditched.