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UK annual inflation beats expectations in February

Consumer prices in the U.K. rose at an annual basis of 1.9% in February, beating Econoday consensus expectations that inflation would remain steady from the previous month at 1.8%, data from the Office for National Statistics showed.

A lower rise in clothing and footwear prices offset a modest increase in prices of food, alcohol and tobacco, according to Mike Hardie, head of inflation at the ONS. Core inflation, which excludes energy, food, alcohol and tobacco, slowed to 1.8% in February from 1.9% a month ago.

Core inflation is expected to hover around or just below the Bank of England's 2% target in 2019, wrote James Smith, developed markets economist at ING, in a note, adding that strong wage growth numbers in the U.K. are playing a bigger factor in a potential interest rate hike by the central bank this year.

Meanwhile, annual producer price inflation accelerated to 2.2% in February from a 2.1% rise a month ago.

Separately, average house prices in the U.K. rose 1.7% in the year to January, following a downwardly revised increase of 2.2% in December 2018. A slowdown in the south and east of England has continued to weigh on U.K. house price growth for the last 2.5 years, the ONS noted.