UK inflation slows its fall

LONDON, Apr 17 (Reuters): Britain's inflation rate slowed by less than expected in March, according to official figures published on Wednesday, adding to signs that a first interest rate cut by the Bank of England could be further off than previously thought.

British consumer prices rose by an annual 3.2 per cent, down from a 3.4 per cent increase in February and its lowest in two and a half years, the Office for National Statistics said.

But the BoE - which has an inflation target of 2 per cent - and economists polled by Reuters had forecast 3.1 per cent. Investors reduced their bets on BoE rate cuts and sterling rose.

The slowdown in the fall in Britain's inflation rate follows an acceleration of headline price growth in the United States which rose for a second month in a row to 3.5 per cent in March, according to data published last week.

BoE Governor Andrew Bailey, who last month said British inflation was "moving in the right direction" for a rate cut, said on Tuesday that different inflation dynamics in the US and Europe could lead to different paths for interest rates.

But analysts said Wednesday's data served as a reminder that Britain's fight against inflation was not yet won.

Ruth Gregory, deputy chief UK economist at Capital Economics, said there was a risk that Britain will follow the trend in the US and see inflation stall.

"The chances of interest rates being cut for the first time in June are now a bit slimmer," she said.