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Petrol, milk and furniture cause MPC fears

Sharp increases in the cost of factory-gate goods have lead to a 3.1 per cent reading for the consumer price index in March, sparking concerns that the monetary policy committee (MPC) will be pressurised to rise the interest rate yet again. Prices which showed the biggest gains were petroleum products, milk and furniture, according to the Office for National Statistics (ONS), which pushed the overall price increase up at the highest rate seen in 11 months.Seven out of nine categories of raw material saw costs increase, leading manufacturers to increase retail prices for the consumer. Crude oil increased the most in price, jumping 8.2 per cent, the ONS said.Economists predict the Bank's MPC will raise the interest rate by 25 basis points on May 10th in order to combat unexpectedly high inflation, as companies seem unhesitant to test the consumer with price increases. Howard Archer, chief UK and European economist at Global Insight, said: "The producer price data provide a very unappetising set of figures for the Bank of England to digest and can only reinforce concerns within the MPC that firms are more confident in their pricing power and are looking to push through price hikes to boost their margins."

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