Inflation rate remains stable

Inflation remained under wraps in February as the consumer prices index (CPI) rose by only 1.3% on a year earlier, down from 1.4% in January, official figures showed today.

February's rate remains well below the government target of 2% and today's surprise fall - analysts had expected inflation to remain steady - should allow the Bank of England to pursue its gradualist policy towards raising interest rates.

The Bank's monetary policy committee (MPC) raised borrowing costs last month for the second time since November, taking them up a quarter-point to 4%. Economists expect further rises in the coming months, with another quarter-point possibly coming in May as the Bank tries to cool consumer spending and borrowing and house prices.

With inflation well under target, the MPC should feel no compulsion to deviate from its policy of gradual interest-rate rises. The Bank has made clear its desire not to deliver any interest-rate shocks to consumers at a time of high household debt.

The Office for National Statistics (ONS) attributed last month's slowdown in inflation to weak clothing and footwear prices.

"Garment prices overall were broadly unchanged following the January sales, compared to the usual recovery in prices last year," the ONS said.

In a sign of the continued buoyancy of the housing market, furniture prices rose strongly after the new year sales. RPIX, the measure of inflation the Bank used to target at 2.5% before the chancellor, Gordon Brown, switched the central bank's mandate in December, also slowed in February to 2.3% from 2.4% the month before.

As an internationally comparable measure of inflation, the CPI shows that the UK inflation rate has been among the lowest in the EU since the start of 2000. The EU 15 average inflation rate for January, the latest available, was 1.8%, compared with 1.4% in the UK. The EU 15 rate was unchanged on the previous month.

Today's inflation figures followed yesterday's annual spring-clean by the ONS of items used to gauge inflation.

Each year some of the 650 items are removed from the ONS shopping basket to make way for similar products as shoppers' spending patterns change. This year, frozen turkey and MiniDisc players made way for fresh turkey steak and digital cameras.

Manicures have been added to the basket for the first time, reflecting increased spending on beauty treatments, and tablets for the dishwasher have replaced powder.

Not all new additions to the index were the latest hi-tech gadgets. Fishing rods, acoustic guitars and men's football boots are in, after a review of spending patterns showed the basket failed to reflect spending on "traditional pastimes".

Internet purchases were included in the ONS shopping basket for the first time in 2000 and this year, web sales of CDs made their first appearance. Items left out of the index this time include toasters, wine glasses and PC printers. The basket is not intended to cover all types of goods and services bought by the average household. Instead goods representing categories of spending are monitored.