UK inflation falls below BoE's 2 pct target in June

09:30 14Jul09 - UK inflation falls below BoE's 2 pct target in June

LONDON, July 14 - British consumer price inflation fell below the Bank of England's target for the first time in almost two years in June while a broader price gauge fell at a record pace, official data showed on Tuesday.

The Office for National Statistics said consumer prices rose 0.3 percent on the month in June, taking the annual rate to 1.8 percent, the lowest since September 2007, from 2.2 percent in May.

The broader measure of retail price inflation, which includes housing costs, fell an annual 1.6 percent, its sharpest drop since records began in 1948.

The figures were broadly in line with analysts' forecasts and as such are unlikely to settle the debate about whether the BoE will expand its 125 billion pound asset purchase target for quantitative easing.

Policymakers have been expecting inflation to ease markedly as a result of the recession and have been surprised by its stickiness in recent months.

Prior to June, consumer price inflation had been above the central bank's 2 percent target since October 2007, peaking at 5.2 percent last September.

The biggest downward effect on the annual CPI rate came from food and non-alcoholic drink prices which fell last month but rose in the same month last year.

Meat, bread, fruit, vegetables and dairy products all contributed. There was also downward pressure from furniture prices which rose less than last year.

One upward pressure on the index came from the price of computer games which rose by more than a year ago.