LONDON - British inflation unexpectedly slowed in August, hitting an 18-month low and sparking hope this week's widely-forecast interest rate hike by the Bank of England could be its last for now.
The Consumer Prices Index dropped slightly to 6.7 percent from 6.8 percent in July, the Office for National Statistics (ONS) said in a statement on the eve of the BoE's latest monetary policy decision.
That was the lowest since February 2022 and confounded expectations for an acceleration to 7.1 percent on higher energy prices.
Wednesday's news sent the pound sliding almost 0.4 percent to $1.2347 in morning deals, with the US Federal Reserve set to hold rates later in the day.
Finance minister Jeremy Hunt said his Conservative government's plan to lower inflation is "working" but conceded that the rate is "still too high".
It comes one day after data showed eurozone inflation also slowed slightly in August.
"The surprise fall in UK inflation triggered a kneejerk selloff in sterling, as today's data cements the expectation that the Bank of England's next rate hike could also be its last," said Swissquote Bank analyst Ipek Ozkardeskaya.
Despite the drop, British inflation remains the highest in the G7 group of rich nations, after peaking at a 41-year high of 11.1 percent in October last year.