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Steady inflation raises UK rate cut hopes

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Date: Tuesday 15 Apr 2008

LONDON (ShareCast) - Hopes for further cuts in UK interest rates were given a boost today as data showed inflation remained at 2.5% in March, a little less than economists had expected.

But that still leaves the Consumer Prices Index (CPI) at its highest in nine months, according to the Office for National Statistics. Experts had thought the figure would rise to 2.6%.

Sterling took another lurch lower as analysts said the Bank of England was now more likely to drop borrowing costs again. A report showing sentiment in the UK housing market at its lowest since records began in 1978 also hurt the pound.

The base rate dropped to 5% last week, the third reduction in five month and the lowest since January 2007.

Today’s ONS figures also revealed that Retail Prices Index inflation, which includes mortgage interest payments, slipped to 3.8%, from 4.1% in February.

Core inflation, which excludes the influence of food and oil, held at 1.2%, the lowest level since August 2006.