Eurozone inflation fall contrasts with UK's high rates

Inflation in the eurozone fell last month as British prices continued to surge above the Government's target.

Consumer prices in the euro area rose by just 0.9% year-on-year, slowing from January's 1%. That compares with the 3.5% level reported in the UK last month.

Economists said the numbers showed that although the weak pound has spurred exports, imports are more expensive which means inflated prices in UK shops.

The European Central Bank wants to keep inflation just below 2% over the medium term and meets this Thursday to set interest rates, shortly after the Bank of England makes its own announcement at noon.

This is expected to be a no-change decision despite the rising inflation, which Bank governor Mervyn King believes is a temporary spike.

Price rises in Europe have been approaching zero because spare capacity remains in the economy. Prices of goods leaving factory gates were 1% cheaper in January than a year ago, figures showed today.