UK inflation falls by more than anticipated to a 15-month low of 7.9%; may limit interest rate hikes

London: Inflation in the UK has fallen by more than anticipated to a 15-month low, official figures showed Wednesday, a development that may ease the pressure for the Bank of England to raise interest rates sharply over the coming months.

The Office for National Statistics said that inflation, as measured by the consumer prices index, fell to 7.9 per cent in the year to June from 8.7 per cent the previous month. Economists had expected a more modest decline to 8.2 per cent.

The statistics agency said the falling of fuel prices was the biggest driver behind the drop, while food price inflation also pared back, though they remained historically high.

Despite the decline, inflation is still running far higher than the Bank of England's target rate of 2 per cent. As a result, the central bank is expected to raise its main interest rate further at its upcoming meeting in early August.

However, the bigger-than-expected fall may mean it only raises it by a quarter of a percentage to 5.25 per cent rather than a half-point.

That may provide homeowners who are looking to get a new mortgage deal some comfort if the sharp upward pressure on mortgage rates starts to decline. (AP)