UK inflation worries ease

LONDON, England -- The UK's inflation rate rose less than expected last month, easing concerns over higher oil prices and possibly delaying a hike in interest rates.

The Office for National Statistics said on Tuesday that inflation -- minus the cost of home loans -- edged up 0.7 percent in April from the previous month. Analysts had forecast a rise of 0.8 percent.

On an annual basis, inflation rose 2.3 percent in April -- the same rate of increase as in March -- and below the Bank of England's 2.5 percent target for year-on-year growth.

The ONS said the marginal rise in inflation last month was due to a sharp fall in food prices, particularly for seasonal products, which offset a 5 percent jump in petrol costs.

"To get 2.3 percent, unchanged, in a month when you have a big boost from petrol prices is a result,'' Geoff Dicks, an economist at Royal Bank of Scotland, told Reuters.

"If anything, the June camp [those who see interest rates going up next month] are struggling as a result of these numbers. We see rates going up in August.''

The BoE has kept its key lending rate at 4 percent -- the lowest level in 38 years -- since November, after cutting the benchmark seven times in an effort to reverse a sharp downturn in the economy.

Last week, the central bank said it expected inflation to stay below its target rate for the next two years before starting to rise in early 2004.

The ONS said one of the biggest threats to inflation is higher motoring costs, as petrol prices rise along with the cost of crude oil. The Organisation of the Petroleum Exporting Countries has been attempting to shore up crude prices by limiting output by its members and other major producing countries.

Another threat is housing costs, which have increased due to higher council taxes despite low interest rates for mortgages, the office said.