(menafn – ecpulse)
U.K. consume prices halted its drop over the previous six month, raising concerns of inflationary pressure.
Consumer Price Index (CPI) for the year ended March unexpectedly soared for the first time in six months to 3.5% from the lowest in 15 months of 3.4% in February, where prices halted its downside fall after retreating from a high of 5.2% in September last year.
The monthly CPI reading slipped to 0.3% from February's reading of 0.6%.
Details of the release showed that rise is attributable to the increase of prices for food, clothing and recreation and culture.
Producer prices for the month of March released last week reignited concerns regarding inflation pressure as it showed that factory-output prices and raw material costs surged.
In the same context, retail Price Index, known the cost of living index, inched down annually to 3.6% compared with a prior of 3.7%, while on the monthly basis the reading plummeted to 0.4% from a previous of 0.8%.
Meanwhile, there are worries that inflation may ease slower than expected, thereby putting policy makers under pressure amid their efforts to cut spending to lower budget deficit and after expanding stimulus in February to boost growth.
The BoE opted to leave both borrowing cost and APF steady in April at 0.50% and 325 billion pounds despite calls from Posen and Miles to boost stimulus by additional 25 billion pounds.
BoE policy maker David Miles said the exit point of stimulus will depend on inflation prospects while the first step in tightening is more likely to be raising interest rate.
Policy maker Spencer Dale also expressed his worries that inflation may slow less than predicted especially amid tensions in the Middle East which may cause an upside pressure from oil prices.
It seems that the pressure is coming from the rise in crude oil prices, which closed the month of March at 103.08 a barrel after hitting a high of 110.53.
On the other hand, the rise in unemployment which climbed to the highest level in 16 year at 8.4% offset the positive impact of the decline in inflation seen over the previous few months.
Osborne in his annual budget said he expects inflation to retreat to 1.9% by the end of 2012, while the BoE predicts the rate to slow to around 2% by the end of the undergoing year on the back of the rise in unemployment and idling production lines which will likely put downside pressure on wages and prices.
Meanwhile, the GBP/USD is trading higher around 1.5950 compared with the day's opening level of 1.5897.