UK inflation to hold steady at 4.4% in March

| April 11, 2011 | 0 Comments

The Office for National Statistics (ONS) is scheduled to announce the UK inflation rate for March tomorrow morning, with analysts expecting the annual rate to hold steady at the 28-month high of 4.4%.

With inflation more than double the 2% target, many continue to speculate whether interest rates will be lifted next month.

Last week, the Bank of England’s Monetary Policy Committee (MPC) elected to keep UK interest rates on hold at the historically low level of 0.5%.

The economy contracted in the fourth quarter of 2010 so the central bank has been reluctant at this stage to lift interest rates as the recovery is losing momentum.

However, the Bank has recently come under pressure to hike rates as it is forced to combat stubbornly high inflation.

Inflation continues to rise due to higher oil and energy prices, as well as rising food costs.

Meanwhile, figures last week revealed factory gate inflation unexpectedly rose in March to its highest since October 2008 after strong rises in the cost of oil and food - however, the central bank continues to state that these pressures are temporary and inflation will fall back to its target by 2012.

Last week, the European Central Bank (ECB) lifted interest rates from 1% to 1.25% – for the first time in almost three years in order to tame rising inflation in the 17-member euro zone.

Last month, inflation in the euro zone rose to 2.6% – above the ECB’s target of just below 2%.

The ONS will publish UK inflation figures at 9:30 a.m. tomorrow.

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