UK CPI rises to 2.2 in July from June39;s 2.0
Services inflation slows sharply to 5.2 from 5.7
Price pressures lower than BoE forecast this month
Cost of hotels, air fares and roadside services fall
Markets see 44 chance of a September rate cut

LONDON, Aug 14 Reuters British consumer price inflation increased for the first time this year in July, official figures showed on Wednesday, but the rise was smaller than expected as services prices closely watched by the Bank of England rose less rapidly.

The annual rate of consumer price inflation increased to 2.2 after two months at the Bank of England39;s 2 target, the Office for National Statistics said, coming in slightly below the median 2.3 forecast in a Reuters poll of economists.

Sterling fell sharply against the U.S. dollar after the data was published and financial markets priced in a 44 chance of a quarterpoint BoE rate cut in September, up from 36 before the data was released.

When the BoE cut interest rates from a 16year high of 5.25 at the start of this month, it said May and June39;s 2 inflation readings probably marked a low point for inflation.

The central bank expected CPI to rise to 2.4 in July and reach around 2.75 by the end of the year as the effect of sharp falls in energy prices in 2023 faded, before returning to 2 in the first half of 2026.

Today39;s data will give the Bank39;s Monetary Policy Committee some measure of confidence that domestic price pressures are less likely to derail a…