UK inflation holds steady at 4.0
Services inflation rise by less than BoE expected
Food prices fall in monthly terms for 1st time since 2021
Investors add to bet on BoE rate cuts
Sterling weakens against dollar and euro

LONDON, Feb 14 Reuters British inflation unexpectedly held steady at 4.0 in January, defying forecasts of a rise, official data showed, offering relief for the Bank of England BoE and Prime Minister Rishi Sunak too ahead of a national election expected this year.

Economists polled by Reuters had expected an increase in the annual rate to 4.2.

Consumer price inflation which surged as high as a 11.1 in October 2022 is expected to fall further in the coming months, paving the way for the BoE to start cutting borrowing costs from their 16year high.

Sterling weakened against the dollar and the euro after the inflation data was published.

Investors added to their bets on the BoE cutting interest rates this year, putting a roughly 72 chance of a first reduction coming in June, compared with only a 40 chance on Tuesday after a surprise jump in U.S. inflation.

Overall, the latest inflation data should reassure the Monetary Policy Committee that the time to start cutting interest rates is approaching, Martin Beck, chief economic advisor to the EY ITEM Club, said.

BoE Governor Andrew Bailey is due to speak to British lawmakers at 1500 GMT on Wednesday.

Britain39;s core inflation, which excludes volatile food, energy, alcohol and tobacco prices, was…