UK inflation falls to 10.1 in January, less than expected
Core, services inflation watched by BoE slow sharply
Sterling drops as investors rein in bets on BoE rate hikes
Lowincome Britons still struggling with living costs

LONDON, Feb 15 Reuters British inflation fell by more than expected in January and there were signs of cooling price pressure in parts of the economy watched closely by the Bank of England, adding to signs that further hefty interest rate hikes are unlikely.

Annual consumer price inflation CPI cooled to 10.1 last month, the lowest reading since September, the Office for National Statistics ONS said on Wednesday.

Economists polled by Reuters had forecast that the annual CPI rate would drop to 10.3 in January, moving further away from October39;s 41year high of 11.1 but continuing to squeeze households39; living standards.

Despite the fall, inflation remains higher than in the United States or euro zone, and many forecasters think it will stay higher as a result of Britain39;s acute labour shortages and other constraints on the economy such as Brexit.

British core CPI which excludes energy, food, alcohol and tobacco fell to 5.8 in January from December39;s 6.3.

Sterling fell against the U.S. dollar and the euro after the data. British government bond prices rose sharply as investors ruled out the chance that the BoE will need to raise interest rates in March by another 0.5 percentage points. Most expect a quarterofapercentagepoint raise next…