UK INFLATION accelerated to a nine-month high in February as gas and electricity prices rose, limiting the Bank of England's scope to cut interest rates.

Consumer prices climbed 2.5 per cent from a year earlier, compared with 2.2 per cent in January, the Office for National Statistics said yesterday.

Prices rose 0.7 per cent on the month, the most since May 2001. Inflation has now exceeded the 2 per cent target for five months. Bank of England governor Mervyn King said last month that consumer price gains may accelerate further, and policymakers have said they face a dilemma as they seek to lower interest rates to shore up economic growth.

"The bank's biggest concern is a period of high, above-target inflation that feeds through to expectations," said Nick Kounis, an economist at Fortis Bank, who formerly worked at the UK Treasury.

"On the other hand, they are facing a marked slowdown in growth. This is the toughest challenge since the Monetary Policy Committee's inception."

The bank previously lowered its benchmark rate by a quarter point in December and in February.

Inflation accelerated as gas and electricity prices increased, the statistics office said. - (Bloomberg)