UK CPI falls to 1.7 in Sept from 2.2
Sterling slumps as investors bet more on BoE rate cuts
Core, services measures also come in below forecasts
Data offers modest help for UK39;s Reeves ahead of budget

Oct 16 Reuters British inflation dropped sharply and key price gauges watched by the Bank of England also fell, bolstering bets on an interest rate cut next month and helping finance minister Rachel Reeves before her first budget.

The rate of annual consumer price inflation dropped to 1.7 in September from 2.2 in August, the lowest reading since April 2021 and driven down by lower airfares and petrol prices, the Office for National Statistics said.

A Reuters poll of economists had pointed to a reading of 1.9.

Sterling fell by fourfifths of a cent against the U.S. dollar and fell sharply against the euro too after the figures were published.

Interest rate futures showed investors were putting a 90 chance on two BoE quarterpoint rate cuts by the end of this year, up from a roughly 80 chance on Tuesday.

Yael Selfin, KPMG UK39;s chief economist, said inflation was likely to rebound due to Middle East conflictdriven oil price increases and domestic energy price hikes. However, she added that this would not prevent the BoE from cutting interest rates.

Greater labour market slack and continued progress on underlying inflation should provide room for the BoE to ease monetary policy further, Selfin said.

Britain39;s finance ministry welcomed the fall in inflation,…