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UK inflation at lowest since late 2016, stokes rate cut talk

Last Updated Jan 15, 2020 at 5:56 am EST

The Union flag of Great Britain and Northern Ireland flies in front of the clock face of the Queen Elizabeth Tower, that holds the bell known as 'Big Ben", part of the Houses of Parliament in London Oct. 10, 2019. Britain's Prime Minister Boris Johnson is to meet the Irish Prime Minister Leo Varadkar later Thursday for talks on Brexit. The Houses of parliament are undergoing restoration works. (AP Photo/Alastair Grant)

LONDON — Inflation in Britain has fallen to its lowest level since late 2016, official figures showed Wednesday, in a development that is likely to heighten expectations that the Bank of England will cut interest rates later this month.

The Office for National Statistics said consumer prices rose by 1.3% in the year to December, down from 1.5% the previous month. The consensus in financial markets was that there would be no change in the rate.

The statistics agency said the main downward pressure on inflation came from accommodation services and clothing.

A number of Bank of England rate-setters, including outgoing Governor Mark Carney, have hinted that the main interest rate could be cut from 0.75% at the next policy meeting on Jan. 30 given lacklustre growth largely due to Brexit uncertainty and below target inflation. The central bank is tasked with setting interest rates to achieve an inflation rate of 2%.

Following the release of the inflation figures, the pound dropped slightly to below $1.30.

The Associated Press

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