The Wall Street Journal-20080213-Annual CPI Rate Hits 2-2- in U-K-

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Annual CPI Rate Hits 2.2% in U.K.

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The annual rate of consumer-price inflation in the United Kingdom rose to a seven-month high of 2.2% in January, further above the Bank of England's 2% target but a bit below expectations.

Economists said the news would likely give some relief to the Bank of England after data on Monday showed inflation at the factory gate rising at its highest rate in more than 16 years. Economists warned that prices are likely to rise further in coming months, amid higher prices for energy and food and changes in the way the index is calculated.

The Bank of England cut its main interest rate to 5.25% from 5.5% last week, but it said inflation pressures could slow further cuts.

Separately, the central bank signaled it will curtail the amount of extra funds offered to U.K. financial institutions in its long-term repurchasing operations next week, as money-market conditions normalize.