British annual inflation hit a 14-month peak in June, official data showed on Tuesday, but new Bank of England chief Mark Carney should be spared for now the pressure to cool the price-increases. Consumer Prices Index (CPI) inflation jumped to 2.9 percent in June from 2.7 percent in May, the Office for National Statistics (ONS) said in a statement.
That was the highest level since April 2012 but was lower than market expectations for 3.0 percent, according to analysts polled by Dow Jones Newswires. On a month-on-month basis, the CPI fell 0.2 percent in June. Analysts had forecast a drop of 0.1 percent. "The largest upward contributions to the change in the (annual) rate came from motor fuels and clothing and footwear," the ONS said in the statement.
"The largest downward contribution came from air transport." The Bank of England's main task is to use monetary policy as a tool to keep annual inflation close to a government-set target level of 2.0 percent, in order to preserve the value of money. However, the annual CPI rate has held stubbornly above the target since November 2009. Should inflation stray more than 1.0 percentage point either side of the target, Carney would be required to write a letter of explanation to British finance minister, Chancellor of the Exchequer George Osborne.
"The avoidance of inflation climbing above the 3.0-percent mark, which had looked to be a possibility, is important because it avoids the new governor Mark Carney having to kick-off his term writing to the chancellor explaining an overshoot of the 2.0 percent target," said economist Victoria Clarke at financial services firm Investec.
Earlier this month, at Carney's first meeting, the BoE held its key lending rate at 0.50 percent - and hinted that it was unlikely to lift record-low borrowing costs any time soon as Britain's economy struggles to mount a strong recovery from recession. Minutes from the bank's monetary policy commitee meeting, held on July 4, are scheduled for publication on Wednesday.
Economists on Tuesday meanwhile added that the lower-than-expected inflation data could persuade Bank of England policymakers to pump out more stimulus cash under its quantitative easing (QE) scheme. Since 2009, the central bank has stimulated the British economy with £375 billion ($572 billion, 440 billion euros) of new money under its QE bond-buying stimulus.
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