Ammon News - 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 much less sharply.

The annual rate of consumer price inflation increased to 2.2% after two months at the Bank of England's 2% target, the Office for National Statistics said, slightly less than the median 2.3% forecast in a Reuters poll of economists.

Sterling fell sharply against the U.S. dollar after the data was published on Wednesday and financial markets priced in a 47% chance of a quarter-point BoE rate cut in September, up from 36% before the data was released.

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

Reuters