BRITAIN'S underlying annual inflation rate was unchanged at 3.1 per cent in January compared with the previous month and remained stubbornly above the government's 2.5 per cent target. Underlying inflation, excluding volatile mortgage interest payments, fell 0.2 per cent from December but the annual rate remained unchanged.

Some independent economists said the figures supported the Bank of England's argument, rejected by the Chancellor of the Exchequer Mr Kenneth Clarke, that interest rates should be increased to prevent inflation heading higher in the next two years.