HIGHER meat prices following the outbreak of foot-and-mouth helped put the brakes on inflation's fall last month.

The key underlying figure remained static at 1.9 per cent, although the headline rate did tumble 0.4 per cent on the back of lower mortgage interest rates.

Both figures were held back by food inflation, which rose 1.8 per cent last month to its highest level since July 1996.

However, the statistics are still certain to increase pressure on the Bank of England to further lower its interest rate figure next month.

It is now two years since the underlying rate, which is used by the bank for setting rates, last exceeded the Government's inflation target of 2.5 per cent.

Sudhir Junankar, CBI associate director of economics, believed that signalled room for a second interest rate cut in the space of two months.

He said: "The way now seems clear for further interest rate cuts, which would help offset the threats to economic growth."

TUC general secretary John Monks said that the bank now had "plenty of leeway" to give a further boost to the UK economy.

The headline inflation rate, which includes mortgage rate payments, fell to 2.3 per cent in March - its lowest level for 13 months.

The Office for National Statistics said the drop was the result of rate changes by the Bank of England and increased competition among mortgage lenders.

Lower petrol prices following fuel duty cuts in Chancellor Gordon Brown's March budget also helped reduce inflation.

However, those gains were offset by higher food prices. While the cost of meat rose because of the lack of home-killed animals, the weather conditions also had an impact on the price of fresh vegetables.

Increases in tobacco duties from the Budget, and the higher cost of furniture and electrical appliances, added to inflationary pressures.

The figures carried few surprises for City analysts.

Andrew Pipe, senior economist at Lloyds TSB, believed the impact of foot-and-mouth on food prices would be reduced as the year progressed.

He said: "If you take out the impact of food increases, which you would expect to be shortlived, inflation is still very subdued.

"Inflation should not prove a barrier to further cuts in interest rates."