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UK inflation held steady in March UK inflation held steady in March
(about 4 hours later)
UK consumer inflation held steady at 2.5% in March, the same level as the previous month. UK consumer inflation remained unchanged at 2.5% in March, the Office for National Statistics (ONS) has said.
The Office for National Statistics said the Consumer Prices Index (CPI) was unchanged at 2.5% on an annual basis last month, slightly below forecasts. The ONS data showed inflation remained steady after a drop in bedroom and kitchen furniture prices offset a rise in air fares and transport costs.
This is the highest level in nine months, due to a new method for calculating energy bills.
Retail Prices Index inflation, which includes mortgage interest payments, fell to 3.8%, from 4.1% in February.Retail Prices Index inflation, which includes mortgage interest payments, fell to 3.8%, from 4.1% in February.
The below-forecast figures are likely to boost calls for further interest rate cuts from the Bank of England to help lift the flagging UK economy. The figures are likely to boost calls for further interest rate cuts to help lift the flagging UK economy.
Analysts had been expecting a rate of 2.6%. UK interest rates were reduced to 5% last week following the latest meeting of the Bank of England's Monetary Policy Committee (MPC).
UK interest rates have been reduced to 5% after last week's Bank of England decision.
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The Bank has so far been much more cautious than the US in cutting rates because of the inflation threat from the spiralling cost of oil and other commodities, which are pushing up food and fuel bills. So far, the Bank of England has been much more cautious than the US Federal Reserve in cutting rates because of the inflation threat from the higher costs of oil and other commodities, which are pushing up food and fuel bills.
The data comes a day after the ONS said UK producer inflation reached its highest rate in nearly 17 years in March at 6.2%, up from 5.9% in February. The data comes a day after the ONS said UK producer inflation reached 6.2% in March, its highest rate in nearly 17 years.
Food and energy costsFood and energy costs
Stripping out the volatile effects of oil and food, core inflation remained unchanged at February's rate of 1.2%.Stripping out the volatile effects of oil and food, core inflation remained unchanged at February's rate of 1.2%.
This is the lowest level since August 2006, suggesting household financial pressures are forcing retailers to absorb cost increases in their profit margins.This is the lowest level since August 2006, suggesting household financial pressures are forcing retailers to absorb cost increases in their profit margins.
The ONS said a sharp drop in furniture inflation offset a rise in air fares and transport costs.
Jonathan Loynes, chief European economist at Capital Economics, said the headline inflation figure "should give the Monetary Policy Committee scope to continue cutting interest rates over the next few months".Jonathan Loynes, chief European economist at Capital Economics, said the headline inflation figure "should give the Monetary Policy Committee scope to continue cutting interest rates over the next few months".
But he added: "Of course, the MPC will remain concerned about the outlook."But he added: "Of course, the MPC will remain concerned about the outlook."
"Not only are food and energy prices likely to push the headline rate up further over the next few months, but there is a clear danger that the sharp rises in producer prices eventually feed through into core CPI.""Not only are food and energy prices likely to push the headline rate up further over the next few months, but there is a clear danger that the sharp rises in producer prices eventually feed through into core CPI."
He predicted that UK interest rates will end the year at 4%, with further cuts in 2009.He predicted that UK interest rates will end the year at 4%, with further cuts in 2009.