UK inflation hits three-year low, fuelling rate-cut hopes

Britain's annual inflation rate fell to a three-year low in September, official data showed Wednesday, fuelling speculation that the Bank of England will resume cutting interest rates next month.

The Consumer Prices Index (CPI) reached 1.7 percent last month, well below the BoE's two-percent target, after hitting 2.2 percent in August, the Office for National Statistics (ONS) said in a statement.

The inflation rate was lower than the 1.9 percent rise that analysts forecast and has cemented expectations that the central bank would likely cut interest rates again in November.

"Lower airfares and petrol prices were the biggest driver of this month's fall," said Grant Fitzner, chief economist at the ONS.

He added that this was partially offset by a strengthening in food price inflation for the first time since early last year.

"It is absolutely amazing to see such a dramatic drop in the UK's CPI number, and the news had brought nothing (but) good things for the Bank of England," said Naeem Aslam, chief investment officer at Zaye Capital Markets.

In August, the BoE reduced it key rate for the first time since early 2020, from a 16-year high of 5.25 percent as inflation returned to normal levels.

But it decided against a second reduction in a row in September.