LONDON, March 21 (Xinhua) -- Britain's consumer price index (CPI), a main gauge of inflation, jumped higher than expectations to 2.3 percent in February, while a fall in public sector borrowing figures will be a bonus for the government as it enters a possibly turbulent period of negotiating Brexit.
The CPI figure from the official data agency the Office for National Statistics (ONS) released on Tuesday is now above the Bank of England's (BOE) target for the first time since December 2013.
The CPI figure was above consensus expectation of 2.1 percent increase, but as expected, food and energy effects were the major drivers of the rise, driven upwards by unfavorable foreign exchange changes.
Sterling has fallen considerably since the June Brexit vote, trading on Tuesday at 1.25 U.S. dollars, down from 1.48 U.S. dollars on June 23 last year.
Items in the goods sector generally have a higher import-intensity, so the increase in goods price inflation to 1.9 percent year on year from 1.1 percent in January last month and -1.4 percent last August seems to demonstrate the high sensitivity to exchange rate adjustments in that sector, according to Sam Hill, the Royal Bank of Canada's senior UK economist.
"By contrast at 2.8 percent year on year, services inflation is little changed versus last August when it was 2.9 percent, suggesting that more domestically-focused inflationary pressures are remaining much steadier for now," said Hill.
Suren Thiru, head of economics at the industry representative body British Chambers of Commerce (BCC), said the rising figure was "further confirmation that UK price growth is firmly on an upward trajectory."
The higher inflation figures will not trigger a monetary policy response from the BOE, whose bank rate is currently at a record low of 0.25 percent, which was cut last August from 0.5 percent as a precautionary measure against instability in the aftermath of the Brexit referendum vote.
As a result, the future path of inflation may be a little higher than the BOE's rate-setting Monetary Policy Committee (MPC) expected, perhaps an early sign that the effects of sterling's fall are feeding through more quickly than had been anticipated, commented Ruth Gregory and Scott Bowman, economists at London-based economics data analysis firm Capital Economics, in a joint note.
"Given the uncertainty around the Brexit negotiations and the fact that there has been little sign of rising domestic cost pressures, there doesn't seem to be any immediate pressure on the MPC to raise interest rates," Bowman and Gregory commented.
"As such, the MPC looks likely to stand pat at least until 2018. But if the economy continues to hold up as well as we expect, interest rates could rise rather sooner than the markets have recently been anticipating."
Meanwhile the public sector net borrowing figure (PSNB, the debt the government incurs to fund activities) fell to 1.8 billion pounds (about 2.25 billion U.S. dollars) in February from 4.6 billion pounds a year earlier, according to another ONS release on Tuesday.
This was much larger than the consensus expectation of a drop to 3.2 billion pounds. However, the decrease was mainly due to temporary factors boosting self-employment tax receipts and a delay in the request for EU budget contributions.
The February outturn -- along with downward revisions to borrowing in previous months -- means that PSNB in the first 11 months of the fiscal year of 47.8 billion pounds was 29 percent below that from a year earlier.
This is similar to the 28 percent fall that the official statistics by the Office for Budget Responsibility (OBR) forecast for the fiscal year 2016/17, suggesting that borrowing will come in fairly close to its recent downwardly-revised projection of 52 billion pounds.
The OBR commented: "PSNB is 19.9 billion pounds lower than last year. This compares with a 20.2 billion pound drop required to meet our March forecast for 2016/17."
Last month, the year-to-date fall over the first 10 months of the year was reported at 13.6 billion pounds, with the steeper fall reflecting the lower February deficit but also revisions to earlier months. (1 pound = 1.25 U.S. dollars)