The chances of an interest rate rise this year have receded after Consumer Price Inflation fell to 2.4% in April – its lowest level since March 2017.
The fall from 2.5% in March was partly due to the timing of Easter, which meant a seasonal rise in air fares was not included in April this year.
The pound fell about half a cent against the dollar after the figures were released before rising to $1.3368.
Analysts now question the prospect of any rate rises this year.
“Inflation falling for the third month in a row further dents any hopes of a late-summer rate rise from the Bank of England,” said Ben Brettell, senior economist at Hargreaves Lansdown.
Neil Jones at Mizuho Bank said: “It is starting to appear the weaker CPI is more structural and not just because of the bad weather. Brexit uncertainty continues to weigh and may indeed put the Bank on hold throughout the summer and beyond.”
However, Nikesh Sawjani, UK economist at Lloyds Bank commercial banking, disagreed.
“The impact of recent increases in oil prices and previously announced hikes in utility tariffs should ensure that inflation proves more ‘sticky’ than it has done so far this year,” he said.
“Against such a backdrop, and with the economy expected to recover in the second quarter, we expect the Bank of England to hike interest rates at its meeting in August.”
Mike Hardie of the Office for National Statistics said the fall in inflation was partially offset by the rise in fuel prices, which are now at their highest level for three-and-a-half years.
The average price of petrol has risen to 127.22p a litre and diesel to 129.96p following a rapid rise in the cost of oil.
The figures did show the effect of the new sugar tax on soft drinks and juices.
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