UK inflation rises to 2.9 percent in June but increase slightly less than anticipated

  • Article by: DANICA KIRKA , Associated Press
  • Updated: July 16, 2013 - 5:40 AM

LONDON — Official figures show that inflation in Britain rose to a 14-month high of 2.9 percent in June.

The increase from May's 2.7 percent rate, reported Tuesday by the Office for National Statistics, was slightly less than anticipated and may provide policymakers at the Bank of England some extra breathing space to work out what further measures they can take to help the British economy.

However, analyst Chris Williamson of Markit.com says that figure has added "to fears that stubbornly high price pressures could smother — or at least subdue" the economic recovery that has been slowly taking hold in Britain.

"But inflation clearly remains the UK's bug-bear and calls into question just how long this strong growth can persist for," Williamson said. "High prices look set to continue to erode spending power, curbing the overall pace of economic growth."

Though growth in the first quarter measured a limp 0.3 percent, many analysts predict the figure set for release later this month will be more robust.

The figure comes only one day before the Bank of England is set to release minutes of its first Monetary Policy Committee meeting under new Gov. Mark Carney. The bank has consistently voted against pumping more money into the British economy through a process called quantitative easing, though market watchers are anxious to see if Carney votes in favor. So far, the bank has put 375 billion pounds ($579 billion) into the economy in hopes of revving up growth.

Though the Bank has a target to keep inflation around 2 percent, policymakers have shown a greater willingness of late to look past temporary increases amid fears that raising interest rates to lower inflation would hurt the recovery.

Unlike the U.S. Federal Reserve, which aims to control inflation and also increase employment, the Bank of England's exclusive mission has been to keep inflation close to target.

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