STERLING has come under pressure, following the revelation that annual UK consumer prices index inflation fell to zero for the first time ever in February.
The pound eased to its lowest level against the euro for a month. The single currency climbed to an intra-day high of 73.71p, after the Office for National Statistics said yesterday that annual CPI inflation had fallen from 0.3 per cent in January to zero in February.
Economists had forecast an annual CPI inflation rate of 0.1 per cent in February. It is the first time annual CPI inflation has been at zero since comparable records began in 1989.
Chancellor George Osborne, in his Budget last week, had reiterated the Bank of England's symmetric two per cent target for annual CPI inflation.
At 5pm, the euro was trading at 73.43p, up by nearly 0.4p on its closing level in London on Monday.
The pound also lost ground against the dollar, following the inflation figures.
At 5pm, sterling was trading around $1.4874, down more than 0.6 cents on its Monday close in London.
Howard Archer, chief UK economist at consultancy IHS Global Insight, said: "A brief period of deflation now looks imminent over the coming months."
He added: "It currently looks ever more likely that the Bank of England will hold off from raising interest rates until the early months of 2016, rather than act in late 2015."
UK base rates have been at a record low of 0.5 per cent since March 2009.
Annual UK inflation on the old all-items retail prices index measure fell from 1.1 per cent in January to one per cent in February.
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