British inflation fell back to the Bank of England’s 2% target last monthin an unexpectedly sharp drop, official data showed on Wednesday, with the clothing and recreation and culture sectors dragging the rate of price growth lower.

Economists polled by Reuters had expected the data to show consumer prices rose at an annual rate of 2.3% in July following a 2.5% rise in June.

Sterling showed little reaction to the figures as investors judged the data was likely to represent a blip in a generally rising trend for inflation.

Earlier this month the BoE said it expected inflation to jump to 4.0% around the end of the year, which would be a decade high. But the BoE said it still thought the jump in inflation would prove to be temporary.

The ONS data showed signs of continued inflation pressure in prices paid and charged by factories.

Output costs rose more quickly than in June and by more than the economists polled by Reuters had expected, increasing by 4.9% compared with July last year. Input costs also rose by more than expected, jumping by almost 10%.

Reuters

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