U.K. Producer Prices Rise at Fastest Pace Since 1986

U.K. producer prices increased at the quickest pace in two decades in May, increasing the odds the Bank of England will refrain from interest-rate cuts even as the economy veers toward a recession.

Prices charged by factories rose 1.6 percent from April, the Office for National Statistics said in London today. That's the most since comparable records began in 1986 and double the 0.8 percent median forecast of 32 economists in a Bloomberg News survey. From a year earlier, prices rose 8.9 percent.

The pound rose and U.K. two-year notes fell the most in a decade after the report gave the clearest sign to date that manufacturers are passing the burden of record oil costs onto customers. The Bank of England kept its benchmark interest rate unchanged last week after Governor Mervyn King signaled there is little scope to lower borrowing costs as inflation accelerates.

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