British inflation rose to hit a nine-month high in February, official data showed on Tuesday, sharpening the debate on whether the Bank of England should add more stimulus to the stagnant economy.
Annual consumer price inflation rose to 2.8 per cent – in line with economists’ forecasts – after holding steady at 2.7 per cent since October, the Office for National Statistics said.
There were signs of further inflation pressures in the pipeline as factory gate prices rose more than expected, pushed up by a sharp rise in the cost of crude oil inputs, aggravated by a weaker pound.
Last month the Bank of England forecast that inflation would exceed its 2-per-cent target until early 2016, pushed up by long-term rises in energy prices and university tuition fees.
In the short term, it expects inflation to exceed 3 per cent due to upward pressure on the cost of imported goods and raw materials caused by sterling’s near 7 per cent slide against the dollar since the start of the year, as well as higher utility bills.
Central bank policy makers are divided on whether above-target inflation is a sufficient reason to avoid restarting its government bond-buying programme at a time when Britain’s economy is teetering on the brink of another recession.
Bank of England Governor Mervyn King and two other policy makers voted for a further £25-billion ($37.8-billion U.S.) of bond purchases in February, and March voting records due on Wednesday will show if anyone else joined them.
February’s increase in consumer price inflation was driven by a mix of rises in household gas and electricity bills, higher petrol prices and increased costs for video games and photographic equipment.
Fuels and lubricants showed their biggest monthly jump in price since January 2011.
Factory gate prices showed their biggest month-on-month jump since April 2011, rising by 0.8 per cent, propelled by a 3.2 per cent jump in manufacturers’ input costs. The main driver was crude oil prices, which rose 7.1 per cent in February alone, their biggest surge since last August, pushed up by a mix of higher global prices for oil and a weaker pound.