Sterling hits session low vs dollar after UK CPI

LONDON, May 13 (Reuters) - Sterling extended losses on Tuesday, erasing initial gains made after a surge in UK inflation, as it raised concerns about the health of the British economy down the line.

Sterling tumbled roughly half a percent to $1.9475 <GBP=>, falling from a session high of $1.9594 hit shortly after the announcement of strong British consumer prices figures, and approached its lowest level in nearly three months.

The euro recovered from a momentary slide after the CPI data to trade at 79.40 pence <URGBP=>, little changed on the day.

Figures showed that British consumer prices surged 0.8 percent in April from March, exceeding expectations for a 0.5 percent rise. Annual inflation leaped 3.0 percent, versus forecasts for a 2.6 percent. Click on [nONS003519]

The data had intially boosted the pound on the view that the Bank of England may delay its rate-cutting campagin as inflation risks persist.

But analysts said that ultimately, the market's view remains intact that UK rates will have to fall.

"I tihnk the bank will cut again. If you look at the activity numbers they are very weak -- the BRC and the RICS housing survey were both very weak. All the indications on the activity side are that the econony seems to be cooling,"

(Reporting by Veronica Brown and Naomi Tajitsu)