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Inflation dips to 4% in March

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12/04/2011

Inflation fell by 0.4% to 4% in March as the cost of food and drink lowered, but was still double the Bank of England’s target. The fall in the consumer price index (CPI) marks a drop from the 28-month high of 4.4% in February.

By far the largest downward pressure to the change in CPI came from food and non-alcoholic beverages, where prices fell by 1.4% between February and March this year.
This compared with a rise of 0.3% between the same two months a year ago.
The fall in CPI will give a boost to Bank Governor Mervyn King, who has resisted increasing pressure to raise the base interest rate from its record low to curb rising inflation.
The Bank held fire on rates this month, keeping them at 0.5% and opting to wait for clearer signs of recovery before following the European Central Bank (ECB) in a hike.
Earlier this month the ECB increased the cost of borrowing by 0.25% to 1.25% in its first rate rise in three years, despite the EU having a much smaller inflation problem than the UK.

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