UK inflation rate unexpectedly falls to 6.7% in August

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British annual consumer price inflation (CPI) unexpectedly fell to 6.7% in August, official data showed on Wednesday, a day before the Bank of England is expected to raise rates again.

Economists polled by Reuters had forecast CPI would rise to 7.0% from July’s 6.8% as a jump in fuel prices and an increase in a tax on alcoholic drinks helped to push up the annual inflation rate for the first time since February.

The BoE said last month that it expected inflation in August would rise to 7.1% before falling sharply to around 5% in October which would still be more than double its 2% target. It is expected to raise interest rates for the 15th time in a row on Thursday, taking Bank Rate to 5.5% from 5.25%.

Many economists and investors think that could be the last hike in the BoE’s tightening cycle as Britain’s economy slows. Core inflation – which strips out volatile food and energy prices – fell to 6.2% from 6.9% in July.

The Reuters poll had pointed to a reading of 6.8% in August.

Sterling fell sharply against the US dollar and the euro after the release of the data by the Office for National Statistics.