The British pound extended gains against the dollar on Friday, after a report showed that producer prices in UK rose more than expected in March, strengthening the expectations over interest rate hike.

GBP/USD rose to a 15-month high of 1.6427, from around1.6400 before the release of data.

A report from the Office for National Statistics showed that the index showing the cost of goods produced by the UK manufacturers increased by 0.9 percent in March month-on-month, against the analysts’ expectations of 2.7 percent gain.

The Bank of England (BoE) kept the key rates unchanged at a record low of 0.5 percent on Thursday.

The sterling continued to gain against the greenback after plummeting to a 7-week low of 1.5959 on March 28, supported by a strong economic data and expectations over interest rate hike.

Gross domestic product (GDP) of Britain fell 0.5 percent in the last quarter of 2010 compared with an earlier estimate of 0.6 percent contraction, the statistics office said last Tuesday.

The BoE is holding off the interest rate at record low of 0.5 percent, citing uneven economic recovery, even though inflation in February was above the central bank’s target of 2 percent for the fifteenth consecutive month. The annual consumer price index (CPI) in the UK rose to 4.4 percent in February compared with 4 percent in the previous month.

But the central bank said in March that it saw merit in waiting” to know the impact of higher oil prices before raising the rates.