UK inflation kept weak by consumer price cuts

London:  UK inflation probably slowed in January to its weakest pace in more than a year as the impact of a sales-tax increase a year earlier faded and retailers cut prices to lure shoppers.

Consumer prices rose an annual 3.6 per cent after a 4.2 per cent gain in December, the median forecast of 36 economists in a Bloomberg News survey showed.

That's the weakest since November 2010. The Office for National Statistics in London will publish the data at 9.30am on Tuesday.

A day later, the Bank of England will release new economic and inflation forecasts, which Governor Mervyn King will present at a press conference.The central bank said on Thursday it will pump another £50 billion (Dh289 billion) into the economy, adding to the £275 billion of bond purchases it has implemented since March 2009.

The stimulus is aimed at preventing inflation falling below the bank's 2 per cent target amid what it says is a "weak outlook" for growth.

Weak activity

"We expect consumer-price inflation to trend down steadily" because of "underlying price pressures being diluted by weak economic activity and elevated unemployment," said Howard Archer, chief European economist at IHS Global Insight in London.

"However, much will obviously depend on what happens with oil prices over the coming weeks and months."

Brent oil has increased 13 per cent on the ICE Futures Exchange in Europe in the past four months, boosted by rising tension between Iran and the West over Tehran's nuclear programme.

The data may force Governor King to write his ninth consecutive letter to the government explaining why inflation is more than one percentage point above the central bank's goal.

King and other policy makers forecast that inflation will slow "sharply" this year.