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Friday, 20 April, 2001, 09:59 GMT 10:59 UK
UK retail sales stagnate
Basket of food
Food prices were sharply higher in March
Strong growth in UK retail sales for most of the past year came to a halt in March, official figures showed.


This increases the likelihood of an [interest] rate cut next month

Jeremy Hawkins
Bank of America
The sign of a slowing economy increases the likelihood that the Bank of England will cut interest rates in May to try and boost spending.

The stagnation in consumer spending comes after sales jumped 0.6% in February.

The strong growth during the past year, means that the March figure is still 4.7% higher than a year earlier, and 1.5% higher than the previous three months.

Surprisingly soft

"March retail sales are surprisingly soft and non-food even weaker ...this increases the likelihood of a rate cut next month," said Jeremy Hawkins of the Bank of America.

The Office for National Statistics, which issued the figures, said the slowing was partly because of a strong rise in food prices, particularly fruit, vegetables and meat.

And it said these rises had occurred despite little discernible impact from the outbreak of foot-and-mouth disease.

Analysts say that although the March sales figures might be a one-off, there is still plenty of scope for an interest cut.

Odds on for a cut

Figures revealed yesterday show that the UK's headline rate of inflation fell to a 13-month low last month, driven by cuts in mortgages.

"It's odds on for another pre-emptive interest rate cut by the MPC [Monetary Policy Committee] at its next meeting in May almost regardless of the strength of consumer demand," said Richard Iley of investment bank ABN Amro.

The Bank's rate setting body has already indicated it is considering further rate cuts.

At the MPC's last meeting, interest rates were trimmed by 0.25%, with three of the nine members indicating that they favoured a bigger cut of 0.5%.

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