British annual inflation dropped faster than expected in August to a near three-year low at 1.7 percent, official data showed Wednesday, in a boost for consumers ahead of Brexit.
The Consumer Prices Index (CPI) 12-month rate "has fallen noticeably into August, to its lowest rate since late 2016", noted Mike Hardie, head of inflation at the Office for National Statistics.
Analysts' consensus forecast had been for a fall in the annual rate to 1.9 percent from 2.1 percent in July. The bigger-than-expected drop "was mainly driven by a decrease in computer game prices, plus clothing prices rising by less than last year", Hardie added.
Finance minister Sajid Javid said a current UK mix of "low inflation and high wage growth means people's hard-earned cash is going further".
The large inflation drop was meanwhile unlikely to put pressure on the Bank of England to cut its key interest rate, a move that would match current European Central Bank and Federal Reserve policy.
"There's been a clear trend amongst central banks towards lower interest rates in recent months, but the BoE have yet to follow suit, with some data even suggesting that a tighter monetary policy could be warranted were it not for Brexit uncertainty," XTB chief market analyst David Cheetham said following the latest inflation update.
The BoE's Monetary Policy Committee is on Thursday due to announce its latest interest rate decision, with the central bank widely expected to keep borrowing costs at 0.75 percent.
"The chance that the MPC follows other central banks and cuts... this year remains slim, despite the sharp fall in CPI inflation in August," said Samuel Tombs, chief UK economist at Pantheon Macroeconomics.
Analysts meanwhile said they did not expect UK inflation to be fuelled by this week's record surge in oil prices.
"Even if the rise in oil prices from $60 to $65 is sustained, it would add just 0.1 percentage points to inflation at the end of the year," said Andrew Wishart, UK economist at Capital Economics research group. "And we suspect Saudi oil output will quickly recover causing oil to return to $60 by year-end," he added in a client note.
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