Surprise as UK inflation falls to 1.6%

Inflation in the UK fell to 1.6% in July as fashion stores launched summer discounts and fierce competition between supermarkets helped keep a lid on food prices for the longest stretch in a decade.

The sharper-than-expected drop in the Consumer Price Index (CPI) measure of inflation, from 1.9% in June, further dampened the likelihood of any rise in interest rates this year and saw the pound fall by a cent against both the dollar and the euro.