Britain's inflation rate unexpectedly held steady in March, official data showed this morning, suggesting strong price pressures further up the economic pipeline have yet to be passed on to consumers.
The Office for National Statistics said consumer prices rose by 0.4 per cent on the month, leaving the annual rate unchanged at 2.5 per cent.
Analysts had expected a monthly rise of 0.6 per cent for an annual rate of 2.6 per cent.
Retail price inflation, often used as a benchmark for wage bargaining, also undershot expectations. On the month, retail prices rose 0.3 per cent to give an annual rate of 3.8 per cent, the weakest since July 2007.
Sterling fell to a record low against the euro and interest rate futures rose as the weaker than expected figures suggested the Bank of England has room to further cut interest rates this year to shore up the economy in the wake of the credit crunch.
Policymakers, who had access to the inflation data prior to cutting rates to 5 per cent last week, have voiced concern over inflationary pressures building up in the economy and have said they expect inflation to rise to around 3 per cent this
year.
But a steady reading in March may alleviate some of the concerns stoked by data today showing record input price inflation and the strongest factory gate inflation in nearly 17 years in March.