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Last Updated: Tuesday, 19 April, 2005, 10:53 GMT 11:53 UK
UK inflation rate jumps to 1.9%
Air passengers
Higher air fares helped push up inflation last month
The annual rate of UK inflation increased to a greater-than-expected 1.9% in March, its highest level for nearly seven years.

The Office for National Statistics (ONS) said price rises in petrol, air fares and food contributed to the rise.

The March figure is up from an annual 1.6% rise in February but still within the government's 2% target.

Economists remain split as to whether the rise will put pressure on the Bank of England to increase interest rates.

Rate rise?

The Bank left rates on hold at 4.75% in April for the eighth consecutive month.

"This is a nasty surprise...that significantly increases the chances of an interest rate hike in May," said Howard Archer, economist at Global Insight.

"There are still significant underlying inflationary pressures stemming from high oil prices, the lack of an output gap and the tight labour market."

James Knightley at ING Financial Markets, however, believes rates may stay unchanged in the coming months.

Inflation graph

"This is largely a food and energy-related surge," he said. "If oil prices continue to decline, then headline inflation should start dropping back as well."

Easter factor

The ONS said the key inflationary pressure was rising transport costs, with air fares rising in March.

This year's March data also took in the Easter holiday period, unlike last year, the ONS said.

Price increases on milk and vegetables also contributed to the rise, as did increases in the cost of furniture and clothing.

Offsetting the rise were falls in the price of wine - due to sales - and weaker increases in the price of beer in licensed premises than a year ago.

The Retail Prices Index (RPI), which takes account of mortgage interest repayments, remained steady at 3.2% in March, the ONS figures showed.

Why the inflation rise sparks interest rate fears

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