Business

UK inflation rate held steady at 2.8% in March

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Media captionRichard Campbell, from the ONS: "Prices are still going up... but not any quicker or any slower"

UK consumer price inflation held steady at 2.8% in March, at its highest level since May last year, the Office for National Statistics said.

Rises in the cost of books, digital cameras and car insurance were offset by lower inflation for petrol and diesel.

The Bank of England has said it expects inflation to exceed 3% later this year.

Many economists believe pressure from food prices, and gas and electricity bills will push up the rate.

In the longer term, the Bank had said it expects inflation to remain above its 2% target until early 2016.

The inflation outlook has prompted caution among policymakers about the increasing use of stimulus to kick-start the UK economy.

The Bank's Monetary Policy Committee (MPC) split 6-3 last month against restarting its asset purchase programme.

Separately, the ONS published figures on Tuesday showing signs that producer price pressures were easing.

Factory gate inflation rose by an annual 2%, the smallest increase since July, helped by the biggest annual fall in crude oil input costs since then.

Rises expected

David Tinsley, economist at BNP Paribas, said the inflation figure was in line with his expectations. "But nonetheless inflation remains above target and it's going to take a number of years to bring it back to target."

Philip Shaw at Investec added: "This is about as close to consensus as you're likely to get. Our view remains that CPI will move above 3% in the coming months.

"The big question is whether the MPC will look through this and become more aggressive on quantitative easing. We suspect it will," he said.

Tuesday's figures from the ONS also showed that Retail Prices Index (RPI) inflation, which includes housing costs, rose to 3.3% in March from 3.2% in February.

In a sector breakdown, the ONS said that price rises for digital cameras, books and DVDs contributed to keeping CPI above target last month.

But inflation eased at the fuel pumps as petrol prices rose by 2.2p a litre against 3.3p a litre a year earlier. Diesel increased by 1.9p a litre compared with 2.6p last March.

Furniture prices also rose at a slower pace than a year ago, while cheaper vodka and lager helped see a 0.5% fall in alcoholic drink and tobacco costs.

Inflation has remained above the Bank of England's 2% target since December 2009, pushed up in recent months by the weakness of the pound.

The inflation figures come ahead of minutes due to be published on Wednesday of the Bank's April interest rate meeting. At the meeting in March, policymakers voted to hold the QE programme at £375bn.

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