British official inflation flat at 3.1 percent in September

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British twelve-month inflation stood at 3.1 percent in September, unchanged from the August level but holding stubbornly above the Bank of England's target, data showed on Tuesday.

The reading, which was in line with market expectations, has stood at 3.1 percent since July. That is far higher than the British central bank's target rate of 2.0 percent.

The Office for National Statistics (ONS) said 12-month inflation was steady last month as lower prices for air fares, petrol and second-hand cars were offset by rising costs for clothing, footwear, food and drinks.

Month-on-month, Consumer Price Index inflation was also flat in September from August, the ONS added. That also tallied with analysts' forecasts.

Last week, the central bank's monetary policy committee (MPC) held its key interest rate at a record low 0.50 percent for the 19th month running, as it struggles to nurture recovery, but opted against pumping out more cash.

"Overall, the stubbornness of inflation is certainly not making life easy for the MPC," said Capital Economics analyst Jonathan Loynes.

"But it is unlikely to prevent the Committee from implementing more Quantitative Easing (QE) if, as looks likely, it decides that the economy requires more support."

Under QE, the bank has injected 200 billion pounds (242 billion euros, 308 billion dollars) into the economy, by purchasing government bonds and high-quality private sector assets to boost lending.

The scheme ended earlier this year, while the British economy pulled out of recession in late 2009.

September meanwhile marked the ninth month running in which annual British CPI inflation was more than one percentage point above the central bank's target of 2.0 percent.

The BoE has forecast annual inflation to hold above 2.0 percent until the end of 2011 because of a looming increase in VAT sales tax, before falling under the target level in early 2012.

"CPI inflation data (for September) is unlikely to trigger a reaction from the BoE in terms of monetary policy," added Credit Agricole CIB analyst Slavena Nazarova.

"Today's inflation data remains consistent with its central-case view of a protracted near-term period of above-target inflation due to temporary factors."

© 2010 AFP

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