British inflation expected to hold at 4.5%

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Economists expect British inflation to stick at more than twice the central Bank of England's target when official data is published Tuesday.

Inflation for May will have remained at 4.5 percent -- its highest level for two and a half years, they predict.

The Office for National Statistics was to publish the Consumer price index (CPI) inflation figures on Tuesday.

Inflation over 12 months has held above the Bank of England's official target rate of 2.0 percent since late 2009.

In recent months, inflation has also been propelled by surging world oil prices and a recent increase in government sales tax.

"A surge in transport services prices in April prompted a significant upside surprise in inflation last month," Allan Monks, an economist at financial services firm JP Morgan Chase, said.

"But these prices appear set to drop back in May and exert downward pressure on inflation," he added.

"Despite this, we expect the CPI to hold at 4.5 percent as the contribution from food and energy prices will increase in May, offsetting the pull down from softer transport prices."

If inflation did stay the same, it would ease pressure on the Bank of England to raise interest rates, which have been on hold at 0.50 percent since March 2009.

The BoE maintained its key lending rate at the record low mark last Thursday, opting against a hike as Britain's economic recovery buckles under the strains of weak growth and rising inflation.

While Britain emerged from its longest recession in late 2009, the recovery has faltered amid cuts to state spending and tax hikes.

© 2011 AFP

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