UPDATE: UK Jan CPI Eases Less Than Expected; +3.0% On Yr

UPDATE: UK Jan CPI Eases Less Than Expected; +3.0% On Yr
    By Natasha Brereton    Of DOW JONES NEWSWIRES  

LONDON (Dow Jones)--U.K. consumer price inflation eased only slightly in January, as a record drop in fuel and lubricant costs was offset by higher core prices, data from the Office for National Statistics released Tuesday showed.

The annual consumer price index fell 0.7% on the month and rose 3.0% on the year in January - its lowest since March 2008. But both figures were higher than tipped by economists surveyed by Dow Jones Newswires who forecast prices to slip 1.0% in monthly terms and gain 2.7% annually.

Economists said the stronger than expected figures wouldn't pose a hurdle to further monetary easing by the Bank of England. The BOE has already cut interest rates four percentage points since October, and indicated last week that it stands ready to boost the money supply.

"These slightly higher than expected readings should not detract from a rate cut and quantitative easing at the (BOE's) March meeting," said George Buckley, U.K. economist at Deutsche Bank.

Transport costs declined 1.9% on the year in January - the biggest fall in seven years - as fuels and lubricants costs slumped 15.2%, marking their largest drop since records began in 1997. Housing and household services costs, and food and nonalcoholic beverages prices also dragged down on inflation.

However, core consumer prices, which fell 0.8% on the month, but reaccelerated on the year, rising 1.3%, slowed the easing in overall inflation. Recreation and culture, furniture, and household goods and maintenance pushed up on price growth, the ONS said.

An ONS official said heavier than usual discounting in December had reduced the fall in prices over the past month.

Alcohol and tobacco prices, meanwhile, marked their strongest pace of growth since March 2001.

Retail price inflation fell 1.3% on the month and edged up 0.1% on the year, with housing costs, especially mortgage interest payments, motoring expenditure and airfares having the greatest downward effect, the data also showed.

That contrasted with economists' expectations for a 0.1% monthly drop and a 0.9% annual rise.

Data are also released on the ONS Web site: http://www.statistics.gov.uk/

-By Natasha Brereton and Joe Parkinson, Dow Jones Newswires; +44 20 7842 9254; [email protected]

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(END) Dow Jones Newswires

February 17, 2009 05:41 ET (10:41 GMT)

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