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Factory gate prices remain at 16-yr high

Factory gate prices in the UK stayed at their highest level for 16 years during February, fuelled by skyrocketing costs for raw materials. According to the latest figures from the Office of National Statistics, non-seasonally adjusted output prices were up 0.3 per cent during February, meaning that the annual rate of 5.7 per cent noted in January remained unchanged. This is the highest level recorded since July 1991 and reflects the problems faced by firms who are having to cope with a 19.4 per cent year-on-year increase in the cost of raw materials. Howard Archer, chief UK economist at Global Insight, said that the figures are likely to prompt the Bank of England to wait until May before cutting interest rates again. He said: "The producer price inflation data are not quite as awful as feared but are still pretty hard for the Bank of England to digest."This suggests that the Bank of England will continue to cut interest rates only gradually in the near term at least."

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