THE Dow Jones industrial average gained 135.26 points to close at 6,587.16 yesterday as investors were heartened by lower-than-expected inflation numbers for March.

According to the data, the economy continued to move steadily ahead without inflationary pressures, easing fears of a big Federal Reserve interest rate hike and sending stock and bond markets sharply higher.

Analysts said an unexpectedly modest increase in the Consumer Price Index, coupled with a small increase in inventories held by business, should take the pressure off the Fed, although a slight increase in interest rates still seems to be on the cards.

There had been concerns that price pressures from wage gains in a strong economy with low unemployment were on the verge of breaking out and that the Fed, which inched rates up last month, would clamp down hard to stem the pressure.

"The CPI report indicates that inflation continues to be very well contained despite continued pressure in the labour market and stronger-than-expected first-quarter growth," said brokerage economist Mr Elliott Platt.