British retail sales growth eased in March after a strong rise in February while prices picked up at their strongest rate in six months, official data showed on Friday.
The Office for National Statistics said sales rose 0.3% on the month, less than the 0.5% forecast by analysts, putting them up 4.8% on the year.
February retail sales volumes were revised up to show 1.6% growth from 1.4% -- the strongest monthly gain in more than two years.
The figures did little to alter expectations the Bank of England will raise interest rates to 5.5% next month, especially given rising price pressures on the high street.
"The report is still indicative of healthy consumer spending," said James Knightley, an economist at ING.
Investors had rushed to bet that interest rates will rise to 5.75% this year after data this week showing inflation spiking to its strongest rate since comparable records began a decade ago.
However, sterling pared gains after the retail sales figures and there are signs higher borrowing costs may be starting to weigh on the economy, with consumer spending likely to contribute less to first quarter growth than in the last quarter of 2006.
"If demand growth remains relatively modest, the Monetary Policy Committee has a bit more time to make up its mind whether it wants to take rates above 5.5%," said Philip Shaw, an economist at Investec.
The easing in sales growth came as retailers raised prices at the fastest pace since September with the deflator, a key measure of price pressures, up 0.4% on a year ago.
The rise in sales was driven by most sectors, with textiles, clothing and footwear contributing strongly again.
However, non-store retailing, which includes online and mail order catalogue shopping, fell almost 4% on the month.