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Prices kept steady over slowing sales

Posted on: 16 April 2008

Related Category: Economics

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Prices have unexpectedly stayed steady in March as slowing high street sales kept price pressures subdued, heightening hopes that the Bank of England still has room to cut interest rates.

The consumer prices index rose 0.4 per cent last month, leaving the annual inflation rate steady at 2.5 per cent above the Bank of England’s target but lower than analysts had expected the Office of National Statistics (ONS) reported.

Sterling fell to a record low against the Euro and interest rate futures rose as the weaker than expected figures increased expectations of further interest rate cuts from the BoE: Howard Archer, chief UK and European economist at Global Insight, said: “The data boosts hopes that the Bank of England will be able to cut interest rate by a further 25 basis points to 4.75 per cent by June,” However, the ONS data contrasts starkly to that released on Monday, which showed that the price of goods leaving factories soared at their fastest rate for 17 years, leading some economists to urge caution. Michael Saunders, economist at Citigroup said: “Any temptation to regard these data as a sign that the UK’s inflation problems are over would be misplaced. It is early days as yet.”

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