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Factory gate inflation rises to 28-month high

UK factory gate inflation hit a 28-month high in February, fuelled by rising oil and food prices.

Figures from the Office for National Statistics showed that producer output prices increased 0.5% on the month to an annual rise of 5.3%.

Input prices rose 1.1 in February, taking their annual rate to 14.6%.

The figures are the highest since October 2008, and come at a time when consumer price inflation is already double the Bank of England's 2% target.

Economists said higher food and energy costs were largely behind the rise, and noted that much of the recent surge in oil prices after protests in Middle East and North Africa will not show up in the figures until March.

"These February data won't have captured the bulk of the oil price rises so there is still more of that to come," said Ross Walker, UK economist at RBS bank.

Although the Bank of England has held interest rates at 0.5%, Governor Mervyn King has acknowledged that the pressures on inflation are mounting.

Many analysts believe that the Bank could push up the cost of borrowing in May or even sooner.

However, the Bank may draw comfort from the fact that core output price inflation, which excludes volatile factors such as oil and food, eased on the year to 3.1% from 3.2% in January, according to the ONS data.

"At the margin this suggests that higher energy, commodity and food prices may still only be having a limited knock-on effect for now," said Howard Archer, economist at Global Insight.

BBC News

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