Factory gate spike sparks inflation fears

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Britain's manufacturing sector saw its annual output prices rise by an unexpectedly high 2.7 per cent in March, government figures show.

The Office for National Statistics (ONS) revealed today that the month-on-month output price jump was 0.6 per cent, caused mainly by oil price rises and the cost of other manufactured products. Input prices, which had fallen by 1.2 per cent in February, rose to 0.7 per cent in March.

The news will be of concern for those hoping that the Bank of England will stay its hand in raising interest rates again this year.

Some financial commentators had begun to suggest that the three interest rate rises in the five months to January might have been enough to push consumer price index inflation back down to the chancellor's target of two per cent from its current 2.8 per cent.

But others have continued to argue that a further hike from the current base rate of 5.25 per cent will be required. Today's factory gate figures reinforce their position.

More likely to be decisive in deciding the monetary policy committee's new stance will be tomorrow's CPI inflation statistic from the Bank.

An increase would almost seal the widely-expected hike from the MPC in May's decision.

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