Annual inflation in the U.K. fell more than expected to 2.7% in February from 3.0% in January, but remained above the Bank of England's forecast of 2.4% for 2018.

Analysts had predicted prices rising 2.8% in February.

The latest inflation data reduces the chances of a surprise rate hike at the central bank's March 22 meeting. But rising wage growth and the latest progress on Brexit raises the chances of a rate hike in May, said James Smith, developed markets economist at ING Research.

The 12-month inflation rate of consumer prices including owner-occupiers' housing costs decreased to 2.5% in February from 2.7% in the prior month, with transport, restaurants and hotels, and food and nonalcoholic beverages making the largest downward contributions.

Core inflation, which excludes energy, food, alcoholic beverages and tobacco, declined to 2.4% in February from 2.7% in the previous month.

Annual producer price inflation decreased to 2.6% in February from 2.8% in January, according to a separate statistical release.