Price pressures in Britain's manufacturing sector soared last month, with cost inflation at a 13-year-high and companies hiking prices at record rates, dampening some hopes for an interest rate cut this month.

Overall growth in the sector remained muted though steady, according to the Chartered Institute of Purchasing and Supply/NTC purchasing managers' index yesterday, with the activity index holding unchanged from February at 51.3, just above forecasts for a reading of 51 But output growth cooled to 52.3 from 53.2 in February to mark its weakest rate since December 2006. Any reading above 50 marks growth, while any below means contraction.

The figures are likely to prove uncomfortable reading for the Bank of England as policymakers fret over rising inflation and slowing economic growth.

"The activity readings are on the soft side but are holding in positive territory; the price numbers are pretty dreadful as manufacturers pass on higher costs at the factory gate," said Geoffrey Dicks, an economist at RBS.

"As the Governor (BoE's Mervyn King) noted again this week, the MPC's dilemma is to steer a course between the two."

A cooling economy this year should aid the Monetary Policy Committee's fight against inflation, but there is a risk that the slowdown could grow in severity if allowed to go unchecked through interest rate cuts.

And if demand falls too swiftly, there is even a danger that inflation could fall too low below the central bank's two per cent target for comfort.

On the other hand, too many rate cuts could spark another spike in price pressures.

Most economists expect the bank's Monetary Policy Committee to trim interest rates by 25 basis points to five per cent either this month or next, but opinion is divided over what might come after that.