The Producer Price Index rose in March as food and energy prices continued to rise heavily, input prices rose in March 2.4% after rising 1.8% the prior month, while compared with a year earlier input prices rose 23.3 after rising 20.6%, while output prices rose 1.4% also above the 0.9% rise reported back in February, and compared with a year earlier prices rose 7.5% from 6.2%.

Moreover core PPI rose 1.0 percent in March after rising 0.3% back in February, while from a year earlier core prices rose 4.6% after rising 3.1% only, both the headline and core PPI came much greater than analysts' expectations!

Another report showed that the U.K trade deficit have shrunk in March though expectations were pointing for a widening deficit, the visible trade deficit shrunk to 7437 million after a reported deficit of 7487, while the deficit to Non-EU countries also have shrunk to 3772 million pounds from the prior deficit of 4023 million.

The better than expected deficit was due to falling imports and rising exports, yet the most important thing is that exports from the services sector which counts for nearly 3/4 of the economy have rose in March!

While rising inflation is becoming now more of a problem to the BOE, as long as food and energy prices remains elevated; inflationary pressures could stop the BOE from further easing especially as no one knows exactly the extent of damage to growth levels affected mainly by the worst housing slump in the U.K since early 1990s, and a new financial ice age as a consequence to the worst financial crisis in the United States that had hit global economies since the great Depression.

Should producers reflect this huge rise in prices to consumers; Britons would fall under more pressures, the fact that foreclosures are on the rise is by itself a good reason for the BOE to be worried, while adding rising inflation to the combination would definitely means more trouble ahead!

Could this mean the BOE won't cut rates anymore? Well I guess we have to wait and see how developments evolve; the situation now looks rather confusing for the BOE are already struggling to keep the balance among growth and inflation.

Slowing growth should help ease inflationary pressures, but what if that doesn't work! Doesn't this mean the U.K would fall into stagflation or at least recession! Tough job ahead for the MPC members and the only thing we can hope for is that their precautionary rate cuts have helped the economy from the worst that seems to be coming our way!